(Part 2)
FORM 1098-T from an eligible educational institution is REQUIRED for 2016 TO CLAIM the American Opportunity Tax Credit AOTC (previously Hope Scholarship Credit), Lifetime Learning Credit LLC, and Tuition and Fees deduction.
Here are some tax tips to benefit from these credits in 2016
• Additional criteria must be satisfied for these refundable credits.
• Must receive Form 1098-T Tuition Statement from an eligible institution by February 1.
• Rules for these credit: must have paid for qualified education expenses for higher education, student must have enrolled at eligible institution, and student can be yourself, spouse or a dependent on your tax return.
• Qualified education expenses are payments for tuition fees and required student activity fees.
• Not qualified for education expenses: room and board, insurance, medical expenses or student health fees, transportation, personal, personal or living expenses.
• For AOTC only. Qualified education expenses include payments off campus or not paid to the school but a student course of study requirements: books, supplies, equipment, and required course book. Must include the employer identification number EIN for any institution to which qualified tuition and related expenses have been paid.
• The annual maximum AOTC per eligible student is $2,500 for the first 4-years of higher education extended through December 31, 2017. If you do not owe tax, up to $1,000 is refundable.
• For LLC only. Qualified education expenses include payments for acquiring or improving student’s job skills: expenses for sports, games, hobbies or non-credit courses. These expenses DO NOT qualify for tuition and fees deduction.
• The annual maximum LLC per eligible student is $2,000 and there is no limit on the number of years.
• If the student withdraws, any amount not refunded, you can claim for the credit.
• Eligible Institution. Schools and institutions offering higher education beyond high school like college, university, vocational school, post secondary run by the U.S. Department of Education, accredited public, nonprofit and privately-owned-for-profit postsecondary. The school is eligible if on the U.S. Federal Student Aid Code list. If not on the list ASK the school, it may still be an eligible institution.
• Identification requirements is stricter. No credit allowed if you fail to include the qualifying individual’s name and tax identification number. The tax identification number must be issued on or before the due date for the filing of the return for the tax year.
• You cannot claim the higher education tuition deduction in the same tax year that you claim the AOTC or LLC or if anyone else claims the AOTC or LLC for the student in the same tax year.
• Use Form 8917 to calculate and claim for tuition and report on the taxpayer’s return.
• None of these credits or tuition and fees deduction is available you are married filing separate.
In accordance with IRS Circular 230, this communication is not to be considered a “covered opinion” or other written tax advice and should not be relied upon for IRS audit, tax dispute, or any other purpose.
* * *
Sy Al-os Accountancy Corporation provides accounting and tax services to individuals, corporations, LLCs and business entities. The Firm has a niche in defending taxpayers audited by the IRS and other governmental agencies.
