Tax Advisor Karla Dennis Guides Students About Education Tax Credits

The government of the United States encourages people to engage in behaviors that are good for themselves and the country. One such behavior is getting educated or educating your children. The government provides people with special education tax credits. These credits will lower the amount of tax owed on your tax return. Tax credits lower the amount of money you must pay the government and encourages people to spend money on their education. 

Karla Dennis, the CEO of Karla Dennis and Associates Inc., regularly educates students about such topics. She believes that students often miss such opportunities because they are not being guided and educated about them. Students deserve some relief, she says, which is why it is particularly important for them to learn about Education Tax Credits and other similar benefits. 

Here are all the necessary things Karla wants students to know about Education Tax Credits:

Eligibility Requirements for Education Tax Credits

Here are some important points related to eligibility requirements Karla emphasizes people should know:

1.  qualify for the full credit, a taxpayer’s income must be no more than $80,000 for single filers or $160,000 for joint filers. Beyond those limits, the credit phases out. 
2. For the 2021 tax year, a taxpayer’s income must be $69,000 or lower if filing single and less than $138,000 if filing jointly. 
3. Income phase-outs are not adjusted for inflation.

Eligibility Criteria for the American Opportunity Tax Credits (AOTC)

1. You are qualified for the AOTC if you pay some or all qualified tuition and related expenses for the first four years of postsecondary education at an institution. 
2. You are qualified for AOTC if you paid qualified expenses for an eligible student and the eligible student is you, your spouse, or a dependent you claim on your tax return. 
3. You are qualified for AOTC if your modified adjusted gross income is below a certain value, i.e., $80,000 or less ($160,000 or less for married filing jointly).

Eligibility Criteria for the Lifetime Learning Credit (LLC)

The Lifetime Learning Credit (LLC) is a tax credit to promote higher education. To claim it, a person, his or her spouse, or his or her dependent must pay qualified higher education expenses to a qualified educational institution. Eligible educational institutions are colleges, technical schools, and universities offering education beyond high school. All qualified educational institutions are eligible to participate in a student aid program run by the U.S. Department of Education.

Important Tax Deductions Students Must Claim for Education Expenses

Let us discuss it separately for AOTC and LLC

For AOTC:

For the AOTC provisions, student activity fees are included in qualified education expenses only if the fees must be paid to the institution as a condition of enrollment or attendance. Expenses for books, supplies, and equipment needed for a course of study are included in qualified education expenses whether the materials are purchased from the educational institution.

For LLC:

Lifetime Learning Credit, student activity fees, and expenses for course-relate books, supplies, and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution for enrollment or attendance by an individual.

How can Students Choose the Right Benefits?

Students need to know that they cannot take more than one of these tax breaks. That is why they must prioritize. If you qualify for all of them, Karla Dennis recommends taking them in this order: the American Opportunity Credit, the Lifetime Learning credit, and finally, the tuition and fees deduction.

How Can Karla Dennis and Associates, Inc. Help You?

If you need help with education tax credits, Karla Dennis and Associates, Inc. will guide you every step of the way. Karla and her firm will analyze your situation and the benefits of all credits you are eligible for. By doing so, they will maximize your tax credits.