While America collectively holds its breath to see if President Joe Biden will extend student loan forbearances past the approaching August 31 deadline, the IRS is reminding college students (and those who claim them as dependents) of two important tax credits to take advantage of.
In a tax tip published August 11, the IRS highlighted the benefits of the American opportunity tax credit and the lifetime learning credit for anyone heading back to school soon. Both are available to individuals enrolled in college, grad school or specialized trade job training, whether for their own tax return or filing for their applicable dependents or spouses.
The American opportunity tax credit provides up to $2,500 annually for the first four years a person is enrolled in higher education or a trade school. The coursework must be credited and going towards a degree or certification. If the tax credit brings a person’s tax balance to $0, then there’s also the chance the taxpayer will get a $1,000 refund.
The lifetime learning credit doesn’t have a four-year cap and can be applied to all years of a person’s collegiate or vocational education. It can be also used to offset costs for advanced job training. It provides a benefit of up to $2,000 annually.
To be eligible for these tax credits, the recipient should have received an Form 1098 tuition statement from their institute of higher learning and also must complete the IRS Form 8863 when it comes time to file tax returns. For those curious if they qualify, the IRS also suggests using the Interactive Tax Assistant tool on their website here.
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