Tax Benefits for Education in 2019
Education tax credits are a way to help you pay for the high costs of attending college by reducing the amount of tax you owe on your annual return.
If you qualify for an education credit and this action reduces your tax to less than zero, then you might be eligible for a refund. There are currently two options available for the 2019 return. You can take the Lifetime Learning Credit or the American Opportunity Tax Credit.
Who Is Eligible to Take Education Tax Benefits?
You must meet all three of these stipulations before the IRS allows you to claim either education tax credit.
- A dependent, third party individual or you must pay qualified education expenses that involve higher learning.
- Eligible students must show active enrollment at an eligible institution.
- Either you, a dependent or a spouse must be the eligible student and get listed on your tax return.
Some taxpayers may qualify for both tax credits in 2019. If you find yourself in this situation, then you can choose to claim one of them, but not both.
You are unable to take the American Opportunity Tax Credit if you lived in the United States as a non-resident alien for any part of the tax year. If you elect to receive treatment as a resident alien for federal tax purposes, then you can qualify for this credit.
U.S. law currently requires a qualifying student to have a valid ITIN or SSN issued before the due date of the tax return to claim the American Opportunity Tax Credit.
If you are filing for it on your return and a dependent or spouse is the eligible student, then you must also have a valid Social Security number.
What Are the Qualified Education Expenses?
If you choose to take the American Opportunity Tax Credit, then you must be an undergraduate student enrolled for at least one academic period for at least half-time. The credit is equal to the first $2,000 you spend, plus 25% of the next $2,000. That means your maximum amount to claim is $2,500.
Should your credit erase the tax debt that you owe to the IRS, then you can receive up to 40% of what remains as a tax refund. This benefit gets capped at $1,000.
This credit begins to phase out if you earn $80,000 annually as a single taxpayer or $160,000 if you’re married and file jointly.
The Lifetime Learning Credit is open to all students. It is the only option to claim if you are in a graduate or doctorate program.
This option provides a credit that’s equal to 20% of up to $10,000 in eligible education expenses. That means your maximum benefit for the year is $2,000.
It begins to phase out if you earn $57,000 annually as a single taxpayer or $114,000 if you’re married and file jointly.
Most qualified education expenses involve tuition, fees, and related costs for enrollment. It does not include room and board, insurance, or transportation. Student health fees also receive exclusion.
Student Loan Interest Deductions for 2019
The student loan interest deduction allows for a household to claim up to $2,500 in interest that got paid on qualifying loans during the 2019 tax year. It is an adjustment to your income, so you get to claim it with the standard deduction or if you itemize.
The deduction won’t cover loans from employer plans. It must be an expense that related to that of yourself, your spouse, or dependents to use the money to pay for qualified expenses. It also requires at least half-time enrollment at the time of loan issuance.
You can keep claiming this deduction as long as you pay for a student loan. Even if you went to school 15 years ago, any interest that you keep paying qualifies for this tax benefit.
Your modified adjusted gross income must be less than $80,000 as an individual or $160,000 if filing a joint return to qualify.
Additional Qualification Stipulations to Meet
If you want to take the tax benefits for education on your 2019 return, then the expenses you paid could not come from tax-free funds. The IRS makes you reduce the number of your qualified expenses by any grants, fellowships, or scholarships you used to pay for your institutional obligations.
Anyone receiving tax-free education help cannot include those figures as part of the credits or deductions offered.
If you, your spouse, or a dependent withdraws from classes, then you can claim the credits for any amount that wasn’t part of a refund.
You should never pay the government more than you owe in taxes each year. If you have educational expenses, then you might have a way to reduce your obligations. It can help to speak with a qualified tax advisor if you have any questions regarding this issue or others before filing your 2019 return.