My child is in a college, am I entitled to any education tax credits?
Posted by: BeamaLife Editor on 14 Apr, 2009
There are two education tax credits, the Hope credit (renamed the American Opportunity credit for 2009 and 2010) and the Lifetime Learning credit. To claim either credit in a given year (you cannot claim both in the same year), you must list your child as a dependent on your tax return. In addition, you must meet income limits. For 2009, a full American Opportunity credit is available to single filers with a Modified Adjusted Gross Income (MAGI) below $80,000 and joint filers with an MAGI below $160,000. A partial credit is available to single filers with an MAGI between $80,000 and $90,000 and joint filers with an MAGI between $160,000 and $180,000. For 2009, a full Lifetime Learning credit is available to single filers with a MAGI below $50,000 and joint filers with an MAGI below $100,000. A partial credit is available to single filers with an MAGI between $50,000 and $60,000 and joint filers with an MAGI between $100,000 and $120,000.
The American Opportunity credit applies to the first four years of undergraduate education. In 2009, it is worth a maximum of $2,500. It is calculated as 100 percent of the first $2,000 of your child’s annual tuition and related expenses, plus 25 percent of the next $2,000 of such expenses. One final point: To qualify for the credit, your child must be attending college on at least a half-time basis.
The Lifetime Learning credit is worth a maximum of $2,000 per year. It is calculated as 20 percent of the first $10,000 of your child’s annual tuition and related expenses. Unlike the American Opportunity credit, the Lifetime Learning credit is available even if your child is enrolled on less than a half-time basis.
If you are eligible to take the credits, remember that you cannot claim both credits in the same year. As a result, you will need to determine which credit offers you the most benefit in a given year. In this analysis, you must consider an important distinction between the two credits. The American Opportunity credit can be taken for more than one child in a given year, provided each child qualifies independently. For example, if you have two children in college, one a freshman and the other a sophomore, you can take a $5,000 credit on your tax return. By contrast, the Lifetime Learning credit is limited to $2,000 per tax return, even if you have multiple children who would qualify independently in the same year. learn more about college savings plans by calling at (877) 972-3262 now.
