Tuition credit is defined as a tax credit that allows eligible students being paid allowable college tuitions and expenses. Allowable college expenses must be for the post-secondary school education, pay by a taxpayer, on your behalf, or your spouse or dependents behalf, to attend or qualify to attend a post-secondary school within or outside your state. The maximum tuition credit per eligible taxpayer; student is $400; being 4% of $10,000; maximum amount of allowable college tuition expenses.
Many taxpayers do not have a proper understanding of the workings and benefits of the tuition credit; hence, miss out on this advantage. To compensate for the knowledge gap, we expatiate on the benefits of the tuition credit. Five (5) of the benefits of tuition credit are;
The tuition credit is for taxpayers seeking to pursue post-secondary education and is used to reduce the amount payable as income tax to the government when the taxpayer earns income. The tuition credit benefits the taxpayers and also the government in that the taxpayers pay reduced amount of income tax to the government and the government earns more from the taxpayers becomes an elite in the society after the education.
The government does not want her citizenry to be uneducated. Hence, the government makes provision for her citizens to pursue post-secondary education in the form of tuition credit. Tuition credit is a form of encouragement to taxpayers to allow them further their education beyond secondary school and hence make the state great. By having the populace educated, the standard of living in the state is enhanced and the government receives better taxes from elite populace. The government however puts some rules in place to guide against abuse of the scheme. Some of the rules are;
Tuition credit obtained for the purpose of post-secondary education can be carried into the future for as long as possible so long as the taxpayers is within the confines of post-secondary educations. Also, the taxpayers must use the tuition credit at the first available opportunity so as to guarantee the government that there has not being a diversion of the credit to other things.
Tuition credits if not used or is in excess to the needs of the taxpayer can be transferred for use to the spouse, and dependents of the taxpayer. The transferred credit must; however, be used for the sole purpose of the pursuit of post-secondary education. The rationale for the provision of the credit must not be defeated even in the transference of the same. The maximum amount of allowable college tuition expenses that can be transferred during the education year of the taxpayer is $5,000.
Another major benefit of tuition credit is that it can be kept for use in the foreseeable future. The taxpayer might not transfer the excess of tuition credit to spouse and dependent but choose to hold on to it for use in the future. This eliminate avoidable pressure on the taxpayer when (s)he decides to further his or her education. The tuition credit does not have an expiry date and can be used for a long period of time once it is used for the pursuance of post-secondary education.
The tuition credit is an advantage to the taxpayers seeking to further his or her education beyond the secondary level. The government made this advantage available to all and all are encouraged to use the opportunity to their advantage. There is no better way the government can encourage pursuance of post-secondary education than taking the burden a bit of the people, and ensuring that they are trained to be better positioned for a better and greater life in the nearest future.
You can consult a tax preparer or a tax accountant to know the intricacies behind claiming tuition and fees tax deduction. Generally, it is not possible to claim deduction in the same tax year you claim Lifetime Learning Credit or American Opportunity credit on tax.
Flynn Financial Group Inc