As many students are quickly finding out, President Obama’s Health Care and Education Reconciliation Act introduced a revision to the Hope tax credit called the American Opportunity Tax Credit. The key problem with this new program though, is that it is limited to the first two years of a student’s academic life. That leaves an incredible number of other students ineligible. Those attending on campus and those getting their college degrees online haven’t been left out, however.
Actually, there already was something in place. It’s called the Lifetime Learning Credit, and it came into being back in 2001, when the original Hope credit was introduced. This credit may not offer as much bang for the dollar, but it does cover a wider field of candidates.
The Lifetime Learning Credit is for students who are in their third year of college, taking post-graduate courses or even going part time with as little as one class. Another key difference is a household can have multiple Learning Credits due to having more than one child in college.
As for the brass tacks of this credit, it gives a student (or the parents of) a 20% tax credit up to the first $10,000, i.e., up to $2,000, for educational expenses including tuition, text books, fees and other education-related items. The expense-related costs are much broader than with the Opportunity credit, and can even include travel if it’s for such things as field research.
There are some important restrictions. The most important is a “phase out” point. This is only for individuals who earn less than $60,000 or for when a couple filing a joint return earns over $120,000 adjusted income to get the Lifetime credit. It’s also important to know this whole matter is handled by the IRS, not the Board of Education, and they will only hand out one check per household, even if it’s for multiple students.
Other provisos include an individual can’t get both an Opportunity and a Lifetime credit; just one or the other. Yet, as said before, if a parent has more than one dependent in school, the parent can get credits for all of them if they meet the other criteria.
Probably the most important point is this is a tax credit, not a deduction. This means you apply for the Lifetime after you get a final total, not subtract it from the expenses. The facts are, the IRS is very particular about how this matter is handled, and will throw a tax form out, even put a claim against the taxpayer, if everything isn’t done absolutely right. As such, it’s definitely a good idea to have the form reviewed by a tax consultant before filing.
Still, one could end up with a check from no less than the IRS if you do all this right. That’s one quick way to get your degree on line in a manner that best benefits you financially. Checking into the grants for college available prior to attending, as well as this credit, means doing more than just your school homework. There is much more information about accredited distance learning degree on the internet.