Once upon a time, the American Opportunity Tax Credit was a pretty simple proposition: Families could get a $2,500 annual tax credit for $4,000 of out-of-pocket college tuition expenses for their dependent student, as long as their income was below the IRS threshold for the credit. However, tax law changes over the past few years have created some opportunities for creative claiming strategies, opening the tax credit up to a larger population.
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Tax Credits and Deductions
Two pieces of legislation that impact college were approved towards the end of 2019. Each has some components that may be of interest.
Currently two tax credits exist to help defray higher education expenses, the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit. Each is slightly different but for most families, the AOTC is the most beneficial. The maximum annual AOTC credit is $2,500 per student. Eligibility is limited to undergraduates who are enrolled at least half time for at least…
Form 1098-T is a tuition statement that colleges and universities are required to provide. The 1098-T shows “payments received for qualified tuition and related expenses” and scholarships received, provided they either came from the college or were disbursed directly to the college. Form 1098-T is used for two purposes: To verify tuition expenses for taxpayers claiming the AOTC or LLC….
It’s hard keeping track of what matters when in the prior-prior year world of the FAFSA and CSS Profile. Here is a table summarizing tax year and asset dates for the next few college years: School Year 2020-2021 2021-2022 2022-2023 2023-2024 2024-2025 2025-2026 2026-2027 FAFSA/ PROFILE Income Tax Year 2018 2019 2020 2021 2022 2023 2024 Assets As Of Oct*…