NEW YORK, NY (WTNH) – As the upcoming school year approaches, the IRS has some tips on how people can save money while in college.
According to the IRS, a person, their spouse or a dependent attending college this fall can claim an education tax credit on their federal tax return. The IRS has released a series of tips on how people can take advantage of these credits.
They suggest people do their homework first, as credits vary in price and amount of time they can be claimed for. The American Opportunity Tax Credit (AOTC) is worth up to $2,500 per year and can only be claimed for the first four years of higher education, while the Lifetime Learning Credit (LLC), worth up $2,000, has no limit on the years an eligible student can claim it. With both credits, only one credit can be claimed per student per year. However if there are two students in college simultaneously, one can apply for the AOTC and the other can apply for the LLC.
The IRS also advises people to use their qualified expenses (tuition, fees, and related expenses) to determine the right credit for them. People can claim a credit in order to buy these expenses, but room and board, medial expenses and transportation are not considered qualified education expenses. Another tip is for students to make sure their school is an eligible education institution by either asking the school or looking at the Department of Education’s Accreditation database.
Once someone has reported their qualified expenses, the IRS reminds people to keep an eye out for their Form 1098-T, which is a tuition statement that should arrive by February 1, 2016. The form reports one’s expenses to them and the IRS. The agency does report that the amount one has paid may be different than the one on the form, because the costs of some items may not appear, such as the costs of textbooks.