On Monday we discussed Coverdell IRAs, Tuesday we discussed Section 529 Plans, Wednesday we turned our discussion to the American Opportunities Tax Credits. Today we will continue our discussion of educational tax credits with the Lifetime Learning Credit.
The Lifetime Learning Credit (LTC) is another education tax credit that you can use, if you don’t qualify for the American Opportunity Tax Credit. The LTC is a credit of up to 20% of the first $10,000.00 of qualifying educational expenses for undergraduate, graduate, or certificate level courses for a student attending classes on at least a halftime basis; or any course at an eligible institution to acquire or improve job skills of the student (no attendance time requirements) .
You cannot claim the LTC if any of the following apply:
· Your filing status is married filing separately
· You are listed as a dependent on another person’s tax return
· You (or your spouse) were a nonresident alien
· You claimed the American Opportunity Credit for the tax year
For the purposes of the LTC qualified expenses include:
· Tuition and fees (but not expenses for room and board)
· Books
· Nonacademic fees such ass student activity and athletic fees
· Expenses for courses that involve sports, games or hobbies that are not part of a degree program
Expenses that do not qualify:
· Insurance
· Medical expenses
· Room and board
· Transportation
The expenses qualifying for the credit must be reduced by any tax-free scholarships or fellowships and other tax-free benefits that you have received.
All accredited colleges and universities are eligible educational institutions. In addition, vocational schools and other post-secondary institutions are also eligible. Generally, if the institution is eligible to participate in federal student aid programs through the U.S. Department of Education, then they may use tuition paid to the school for claiming the LTC.
As I mentioned earlier, the LTC is 20% of the first $10,000.00 of qualified education expenses that you paid for all eligible students. For tax year 2012, the maximum credit you can claim is $2,000.00.
The amount of your LTC is phased out gradually, if your modified adjusted gross income (MAGI) is between $51,000.00 and $61,000.00 ($102,000.00 and $122,000.00 if you file a joint return). You cannot claim the credit if you MAGI is more than those amounts.
The LTC is a great way to receive money for paying for college.
For more information visit www.smalleynco.com
If you have any questions you can email Craig W. Smalley E.A.
Author of the books: It Starts With an Idea – Tax Tips for Small Businesses available on Nook and Kindle, The Ultimate Real Estate Investor Tax Guide, available on Nook and Kindle, The Complete Guide to the New Tax Law – American Taxpayer Relief Act of 2012 available on Nook and Kindle, Everything You Wanted to Know about the IRS – Audits, Appeals and Collections available on Nook and Kindle, and Tax Avoidance is Legal! The Complete Guide to Individual Income Tax available on Nook and Kindle
Comments