Don’t Miss Any of These Money-Saving Tax Credits
If You, Your Spouse or a Dependent Is a Student or Taking Classes …
You could claim either the American Opportunity Credit or the Lifetime Learning Credit.
Education credits are claimed on the IRS form 8863. It’s important to note that you cannot claim the Lifetime Learning Credit and the American Opportunity Credit for the same student, even if he/she qualifies for both. You can mix and match your credits if you are paying for more than one student, choosing one credit for one, another credit for the other, and then switch the next year. But no double crediting in the same year! We suggest taking the American Opportunity credit if you are eligible for both, because you can claim more expenses and the credit can go up to $500 higher. Publication 970 will give you the nitty gritty of what we summarize below.
If You, Your Spouse or a Dependent Is a Full-Time Student …
You could take the American Opportunity Credit, which is a modification of what used to be called the Hope credit. It allows you to take up to $2,500 off your taxes if the student is working toward a degree or other educational accreditation. The American Opportunity Credit is a big improvement on the Hope credit because it:
- Makes the benefit available to more Americans, like those with higher incomes and those who pay no tax
- Allows you to add required course materials to the list of qualifying expenses
- Allows you to claim four years of post-secondary education (graduate school) instead of just two
You can claim this credit if:
- You are an individual with an AGI of $90,000 or less, or
- You’re part of a married couple filing jointly with an AGI of $180,000 or less
Even if you don’t pay taxes at all, you can get up to $1,000 refunded to you by taking this credit. You can learn more about the American Opportunity Credit on the IRS website.
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If You, Your Spouse or a Dependent Is Taking Continuing Education Classes …
You could take the Lifetime Learning Credit, which is up to $2,000 for post-secondary education expenses. You should take this if you are taking post-secondary classes, but you’re just taking a class or two, or not working toward a degree.
There is no limit on the number of years the Lifetime Learning Credit can be claimed. In order to get this credit, you must either:
- Pay qualified tuition expenses
- Pay the education expenses for an eligible student (yourself, spouse or a dependent for whom you claim an exemption on your tax return)
You can claim this credit if:
- You are an individual with an AGI of $62,000 or less, or
- You’re part of a married couple filing jointly with an AGI of $124,000 or less
If You Have a Child or Children Under Age 17 …
You could claim the Child Tax Credit, which can reduce your taxes by up to $1,000 per child. If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit, which will refund you the difference even if you don’t pay any taxes. In order to claim the Child Tax Credit, you must answer yes to all of these questions:
- Was he/she 16 years old or younger as of December 31st, 2012?
- Is he/she your son, daughter, foster child, stepchild, brother, sister, stepbrother, stepsister or child of any of those people (like your grandchild, niece or nephew)? An adopted child is considered your child.
- Did you claim him/her as a dependent on your tax return?
- Is he/she a U.S. citizen, U.S. national or U.S. resident alien?
- Did he/she live with you for more than half of 2012? There are some exceptions to the residence test, which can be found in IRS Publication 972, Child Tax Credit.
- Was your AGI less than $75,000 if you’re an individual, less than $55,000 if you’re married filing separately or less than $110,000 if you’re married filing jointly?
If the answer to all of these questions is yes, then you can take the Child Tax Credit.
If You Had a Caretaker for Your Child or Dependent …
You could claim the Child and Dependent Care Credit. You can claim this credit if you paid someone to care for your child under 13, spouse or dependent who was physically or mentally incapable of caring for themselves. You’ll have to provide the taxpayer ID of the care provider. You can take the credit if:
- You’re filing jointly with your spouse.
- You (and your spouse if you’re married) were either looking for work, earning an income or a full-time student for five or more months of the year.
- The dependent for which you paid for care lived with you for more than half the year.
You cannot take the credit if:
- The care provider was someone you or your spouse can claim as a dependent.
- The payment for the care was made to your spouse of the parent of the child.
For complete information on this credit please see IRS Publication 503.