IRS Form 8863 + Publication 970 - Hope and Lifetime Learning Credits - John R. Dundon II, Enrolled Agent
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IRS Form 8863 + Publication 970 – Hope and Lifetime Learning Credits

IRS Form 8863 + Publication 970 – Hope and Lifetime Learning Credits

According to IRS Publication 970 the modified version of the Hope Credit is now referred to as the American Opportunity Tax Credit (AOTC) and extended through 2012. The AOTC is available for the first four years of post-secondary education. It has been expanded so that qualified tuition and related expenses now include expenses for course books, supplies, and equipment needed for a course of study, whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance. Additionally:

• The credit is equal to 100% of the first $2,000 spent and twenty-five percent of the next $2,000 per student each year. The full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualifying expenses for an eligible student.

Forty percent of the credit is refundable, so even those who owe no tax can get up to $1,000 of the credit for each eligible student as cash back.

• You cannot claim the tuition and fees tax deduction in the same year that you claim the AOTC or the Lifetime Learning Credit. You must choose to either take the credit or the deduction, whichever is more beneficial.

The Lifetime Learning Credit helps parents and students pay for post-secondary education. The Lifetime Learning Credit is a tax credit for any person who takes college classes. It provides a tax credit of up to $2,000 on the first $10,000 of college tuition and fees. You can claim the Lifetime Learning Credit on your tax return if you, your spouse, or your dependents are enrolled at an eligible educational institution and you were responsible for paying college expenses. Unlike the Hope Credit, the person need not be enrolled at least half-time. Even if you took only one class, you may take advantage of the Lifetime Learning Credit.

There is no limit on the number of years the Lifetime Learning Credit can be claimed for each student. However, you cannot claim the AOTC and Lifetime Learning Credit for the same student in one year. The Lifetime Learning Credit in my opinion may be particularly helpful to graduate students, students who are only taking one course, and those who are not pursuing a degree.

Generally, you can claim the Lifetime Learning Credit if all three of the following requirements are met:

1. You pay qualified education expenses of higher education.

2. You pay the education expenses for an eligible student. The eligible student is yourself, your spouse, or a dependent for which you claim an exemption on your tax return.

3. If you are eligible to claim the Lifetime Learning Credit and also eligible to claim the AOTC for the same student in the same year, you can choose to claim either credit, but not both.

If you pay qualified education expenses for more than one student in the same year, you can choose to take credits on a per-student, per-year basis. This means that you can claim the AOTC for one student and the Lifetime Learning Credit for another student in the same year. Both Credits are claimed on IRS Form 8863 and answers to additional questions can be found here.