Tax Question...

nunn

I know the answer is buried somewhere in the reams of IRS material I have downloaded and printed, but someone here may have the right answer, and I am a little lazy.

Dawnie's school finally got around to sending out her Tuition Statement, Form 1098-T, for tax purposes. Fortunately, I haven't yet sent in my 1040.

I see that there is more than one way to claim the tuition. Any idea which way is the best way?

Rack Ops

I used to deal with this every year....If memory serves me right, the "lifetime learning" credit was what I always took.

shoff14

Something replaced the lifetime learning credit this year for more breaks. My wife did our taxes online and I don't know much about it. The Lifetime learning credit maxed out at 2500. This new thing for this year depends on your income vs expenses from my understanding.

http://www.collegeboard.com/student/pay/ways-to-pay/446.html

reading that webpage it would seem for this year we were able to claim both, so we got about 6000 in tax credits from last year. I paid about $15000 in tuition last year going part time.

pirate2501

It' called the American opportunity credit, but my accountant went with the Lifetime learning credit again this year cause it worked out better for us.

neacpa

If she is in a post-graduate program use the Lifetime Learning Credit. If still in her first four years of college, definitely use the American Opportunity Credit. The AOC is a 100% credit of first $2,000 of expenses and 25% of next $2,000 expenses, maxing out at $2,500 of credit. But the kicker is that the AOC can also be used for books and supplies, whereas the Hope and Lifetime Learning Credits are on tuition and required fees only. Also, if you purchased a computer and it was REQUIRED by the school to take a class, then it can also be used on the AOC credit. And this year, a part of the tuition credit can be refunded even if there is not sufficient tax liability. Hope this helps.
Stan

nunn

I guess you could call it a trade school. She will be certified as a Licensed Massage Therapist.

select-fire

Any work related articles can be used as a tax deduction. Clothing, tables etc. Even work related trips involving seminars or travel.

neacpa

A qualified educational institution is defined as any postsecondary educational institution eligible to participate in a student aid program administered by the Dept of Education, as amended by the American Recovery and Reinvestment Act of 2009. Basically, if students who attend that school are eligible to obtain Pell Grants or other govt assistance, the tuition of that school qualifies for the credits.

Select is right to an extent. Yes, the items are deductible but will they help? Probably not. Unless she is self employed (1099 instead of W2), those expenses are used on Form 2106 and are subject to a 2% floor of income and then that amount goes toward the itemized deductions. You must itemize to use them. Example - income is $60,000. 2% of that is $1,200. The first $1,200 of these expenses (and a couple of others) are down the drain, can't use them.

Simple Man

Do what I do, throw money at the IRS and run screaming.[:p]

nunn

I wasn't concerned with a business expense deduction, considering she had no business income from which to deduct it. I was concerned with a tax credit.

Thanks for the good advice, those of you who had good advice anyway.

We used the AOC credit, and it made a HUGE difference.

Thanks to all, and I am happy now.