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Paying for College? These Tax Credits Could Help

Tuesday, May 05, 2020

Our hearts go out to the 2020 graduating college and high school classes. Sadly, COVID-19 has thwarted the traditional graduation walk. Still, in the spirit of safety and creativity, we abide by the distancing protocols and creatively celebrate the occasion with family and friends. 

While we hope the 2020 classes are the only ones impacted and that the crisis is abated soon, the reality of paying for college still exists for thousands of families that are about to start paying for college. Add to this, the rise of online universities, we can begin to see the need to find ways to save.

Well the IRS offers two tax credits available for people paying higher education costs for yourself, a spouse, or a dependent. The American Opportunity Tax Credit (AOTC) and The Lifetime Learning Credit (LLC) can be very beneficial for families looking forward to college. Here is why.

Benefits of the AOTC Tax Benefit

  • The maximum tax benefits of up to $2,500 per eligible student. For households with multiple students, this would be significant savings.
  • The AOTC can be used for the first four years at an eligible vocational school or educational institution. With a 4-year degree, it is possible to use the benefit throughout college
  • The benefit is partially refundable, and people can potentially get up to $1,000 back. An extra thousand dollars could be put to good use for a college student.

Benefits of the LLC Tax Benefit 

  • With the LLC, a maximum benefit of $2,000 is available, per tax return, per year, no matter how man qualifying students. When it comes to the potential savings, you do the math.
  • The benefit is available for all years of postsecondary education as well as for all courses to acquire or improve job skills.
  • It is rightly called the Lifetime Learning Credit because you can use the benefit for an unlimited number of ta years.

To take advantage of these tax credits, you must qualify. However, with the potential savings, they both offer, at Alliance Tax Solutions, we make sure that all our clients take advantage of the savings. Even if you do not qualify, for the AOTC or the LLC, you can still take advantage of the Tuition and Fees Deduction and still save on education costs. For a full explanation of all the education tax benefits that are available, review IRS Form 970.

To get the maximum benefit from filing your taxes, we always recommend that you consult a professional tax preparation firm like Alliance Tax Solutions. We are always available to assist taxpayers with tax preparation and tax resolution issues, and we invite you to call us for a free consultation at (404) 592-1227 or request one online.

 

 

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Alliance Tax Solutions, LLC, Accountant, Atlanta, GA