Higher education in the USA is not everyone’s cup of tea. While many people still find it far-fetched due to the vast amount of time and money it takes, some try their luck in higher education. And why won’t they? From the world’s top 100 to Ivy League colleges, all can be found in the USA! These universities have a huge amount of tuition fees and a considerable amount of tax included with it. But does that mean your dreams shall die down? Of Course not!
In such cases, the education tax credit could be your savior. An education credit reduces the amount of tax owing on your tax return, which helps with the cost of higher education. You may be eligible for a refund if the credit lowers your tax to less than zero. The American opportunity tax credit (AOTC) and the lifelong learning credit are the two education credits available (LLC).
But can everyone really claim an education credit? That is why we thought to make an entire article about this!
There are actually three criteria that you must meet before you claim any credit for your education.
1. You are dependent on a third party for your education. This means, if some distant relative runs your education or you are the one working day and night for your college tuition, the education tax credit can help you lessen your burden.
2. You are an eligible student enrolled in an eligible educational institution (a school offering higher education beyond high school).
3. And lastly, the eligible student is yourself, your spouse, or a dependent you list on your tax return.
This sheds light on the topic of who is not really part of this criteria. At first, we should all be clear about the fact that this is only for U.S residents. So yes, if you or your spouse who’s studying here but a non-resident of this country, this one’s not for you. Also, you cannot claim this tax credit twice. I mean, reasonably speaking, the government is liable to give you this benefit only at the first attempt of your higher education study. And last but not least, if you are dependent on your parents, you will not be subjected to claim any educational tax benefit, considering your parents’ tax-pay earners, and you have no burden of your education.
Now, if the question comes to your mind that why do these three criteria get special treatment, the answer is quite simple, an education tax credit is for those people who may find it hard to bear their educational expenses. It aims to help the students who are potential enough to have a higher degree but may fall behind due to financial constraints.
However, this entire process of the education tax credit could be a tricky business. The whole procedure could juggle you up, and you may never reach the point of enabling the tax credit. To drag you out of such situations, there are professionals around the corner. They become your consultant, help you out and eventually make sure you enable your education tax credit. They make sure that you know your rights as a taxpayer and become familiar with the obligations and benefits you might have from states.
Hence, if you want to obtain the education tax credit to make your journey to a higher degree even smoother, make sure you consult a very good CPA!