As parents of college age students or those that will be entering college in the near future, the tuition and fees deductions up to $4,000 that you may have relied on in the past are no longer available. However, there are a couple of educational credit alternatives. Below are 2 alternatives.
- The American Opportunity Tax Credit (AOTC). This credit is for qualified undergraduate fees, course materials, and tuitions. It gives you up to $2,500 per year, per student. This credit is phased out at higher income levels. The credit is eliminated for married couples earning modified adjusted gross income of $180,000 and singles with a modified adjusted income of $90,000.
- The Lifetime Learning Credit (LLC). This credit gives you an annual credit of 20% on the first $10,000 in qualified fees and tuition ($2,000 credit) for either graduate or undergraduate level classes. This credit has no lifetime limit, and is per tax return, not per student. However, the qualifications for the full credit in 2019 are only for married couples earning less than $116,000 and singles earning $58,000.
Usually, both of these credits are more helpful than the expired fees and tuition deduction. This is due to the fact that, as credits, your income is reduced directly and a deduction reduces the amount of income that is taxed. Additionally, there are other tax benefits that may reduce the cost of education such as:
- Breaks for employer-provided tuition assistance.
- Student loan interest deductions.
- Tax beneficial college savings options.
- Tax planning alternatives.
At Summit CPA we offer multiple resources to assist you will your tax and financial needs. For more tips contact our office at 866-497-9761 to schedule an appointment with our advisors.