Posted by Carmen Garcia

Five Common Mistakes When Claiming Education Credits

Five Common Mistakes When Claiming Education Credits

The Lifetime Learning Credit and American Opportunity Tax Credit reduces the amount of tax you owe. Taxpayers could even qualify for a refund with AOTC should the credit be more than your tax. There are, however, common mistakes many people make when claiming these education credits. 

We will explore how to avoid these mistakes or clean up the mess should you end up making one

Claiming Education Credit With a High Income

There are income limits for both AOTC and LLC. This means that your income should be above the threshold, and you cannot claim these credits.

Your modified adjusted gross income must be less than $80,000 as a single to claim the full AOTC. For married couples filing jointly, the MAGI should be less than $160,000. If your MAGI is between $80,000 and $90,000 for single and between $160,000 and $180,000 for a married couple, you might still be able to claim partial AOTC. You, however, cannot claim the credit if your MAGI is above $90,000 or $180,000 for couples.  

For LLC, on the other hand, as long as your MAGI is $57,000 or less for single and $114,000 or less for married filing jointly, you can claim the full credit. For MAGI between $57,000 and $67,000 for single and between $114,000 and $134,000 for married couples filing jointly, Should your income be above the threshold of $67,000 and $134,000 for single and couples, you cannot claim the credit.

Claiming Both Tax Benefits

In other words, one cannot claim both the LLC and the AOTC for the same student in a given tax year. Should you be privileged to get tax free grants, you must remove the amount of the grant from the qualified education expenses before you can claim the credit.

Both Parents and Students Claiming the Same Credit

Once your parent claims any education credit on the expense they incurred in sending you to college, you, as the dependent, cannot claim the same education credit again. As a result, parents and their children must be on the same page when filing their tax returns. This is important to avoid claiming the same credit twice for

Claiming a Credit When You do not meet the Requirements 

There are requirements you must meet before claiming either AOTC or LLC. For AOTC, for instance, it is applicable for the first four years of a higher degree course. Also, to qualify, you must have no felony charges. Also, the student must be enrolled in a program that leads to an educational credential that can be recognized.

You might not be able to claim AOTC if you have already claimed it for four years. If you are enrolled less than half of the duration. People pursuing graduate courses or taking courses to boost their skills or any program that will not lead to a degree also cannot claim AOTC. 

LLC comes with less condition; hence you could access it to see if you could claim it.

Claiming a Credit for Non-qualified Expenses

The original intention for education credit is to reduce tuition fees, and other qualified expenses related to education. AOTC, however, allows you to claim the expense for supplies, books, texts, and other things you will need for your studies that you will need to buy on your own.

Claiming an expense that is not qualified is an error. 

What do you do when there is a mistake in claiming education Credits?

Be sure always to check the rules that guide each of the education credits. This way, you can be confident that you are claiming the credit for the ones you qualify. There are resources on the IRS pages with which you can know if you are eligible for this credit.

If you claim the AOTC and you are not qualified, the IRS could audit you. If they discover that your claim is not correct and you have nothing to back up your claim, you might be fined a penalty, mandated to refund the credit you got with interest.

With this in mind, be sure that you have every document that qualifies you for any of the education tax credit. Should there be an error in claiming the AOTC, be sure to make amends as soon as you can. 

Carmen Garcia
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