Do you have children attending a college, post-graduate or vocational school? You may qualify for one of two education credits.
Who can claim an education credit?
There are additional rules for each credit, but you must meet all three of the following for both:
- You, your dependent or a third party pays qualified education expenses for higher education.
- An eligible student must be enrolled at an eligible educational institution.
- The eligible student is yourself, your spouse or a dependent you list on your tax return.
What kinds of credits are available?
• The maximum American Opportunity Tax Credit (AOTC) is $2,500 per student.
• The maximum Lifetime Learning Credit (LLC) is $2,000 per family.
For example, if you had 3 kids attending colleges in 2023, you may have claimed a total AOTC of $7,500, while the LLC is limited to $2,000 per family.
However, unlike the AOTC, the LLC is available for more than just four years of undergraduate study. You can generally only claim one credit or the other. Tip: Both credits are phased out for higher-income taxpayers based on modified adjusted gross income (MAGI).
What are the income limits for AOTC?
- To claim the full credit, your modified adjusted gross income (MAGI) must be $80,000 or less ($160,000 or less for married filing jointly).
- You receive a reduced amount of the credit if your MAGI is over $80,000 but less than $90,000 (over $160,000 but less than $180,000 for married filing jointly).
- You cannot claim the credit if your MAGI is over $90,000 ($180,000 for joint filers).
What are the income limits for LLC?
- For tax year 2023, the amount of your LLC is gradually reduced (phased out) if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return).
- You can’t claim the credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint return).
For more information, please contact Paul Joo CPA.