Tax Tips – College Tax Credits

College Tax Credits

Going to college can be a stressful time for students and parents. The following tips regarding College Tax Credits that can help offset some college costs and maybe relieve some of that stress.

American Opportunity Tax Credit.  This credit can be up to $2,500 per eligible student. The AOTC is available for the first four years of post secondary education. Forty percent of the credit is refundable. That means that you may be able to receive up to $1,000 of the credit as a refund, even if you don’t owe any taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment. A recent law extended the AOTC through the end of Dec. 2017.

Lifetime Learning Credit.   With the LLC, you may be able to claim up to $2,000 for qualified education expenses on your federal tax return. There is no limit on the number of years you can claim this credit for an eligible student.

You can claim only one type of education credit per student on your federal tax return each year. If you pay college expenses for more than one student in the same year, you can claim credits on a per-student, per-year basis. For example, you can claim the AOTC for one student and the LLC for the other student.

You can use the IRS’s Interactive Tax Assistant tool to help determine if you’re eligible for these credits. The tool is available at IRS.gov.

Student loan interest deduction.  Other than home mortgage interest, you generally can’t deduct the interest you pay. However, you may be able to deduct interest you pay on a qualified student loan. The deduction can reduce your taxable income by up to $2,500. You don’t need to itemize deductions to claim it.

These education benefits are subject to income limitations and may be reduced or eliminated depending on your income.

For more information, visit the Tax Benefits for Education Information Center at IRS.gov. Also, check Publication 970, Tax Benefits for Education. The booklet’s also available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Further Reference:

IRS YouTube Videos:

IRS Podcasts:

Education Tax Credits and Deductions – English | Spanish

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Tax Tips for Filing an Amended Tax Return

The Internal Revenue Service

The Internal Revenue Service

What should you do if you already filed your federal tax return and then discover a mistake? You have a chance to fix errors by filing an amended tax return. This year you can use the new IRS tool, ‘Where’s My Amended Return?’ to easily track the status of your amended tax return. Here are 10 facts you should know about filing an amended tax return.

  1. Use Form 1040X, Amended U.S. Individual Income Tax Return, to file an amended tax return. An amended return cannot be e-filed. You must file it on paper.
  2. You should consider filing an amended tax return if there is a change in your filing status, income, deductions or credits.
  3. You normally do not need to file an amended return to correct math errors. The IRS will automatically make those changes for you. Also, do not file an amended return because you forgot to attach tax forms, such as W-2s or schedules. The IRS normally will send a request asking for those.
  4. Generally, you must file Form 1040X within three years from the date you filed your original tax return or within two years of the date you paid the tax, whichever is later. Be sure to enter the year of the return you are amending at the top of Form 1040X.
  5. If you are amending more than one tax return, prepare a 1040X for each return and mail them to the IRS in separate envelopes. You will find the appropriate IRS address to mail your return to in the Form 1040X instructions.
  6. If your changes involve the need for another schedule or form, you must attach that schedule or form to the amended return.
  7. If you are filing an amended tax return to claim an additional refund, wait until you have received your original tax refund before filing Form 1040X. Amended returns take up to 12 weeks to process. You may cash your original refund check while waiting for the additional refund.
  8. If you owe additional taxes with Form 1040X, file it and pay the tax as soon as possible to minimize interest and penalties.
  9. To use either ‘Where’s My Amended Return’ tool, just enter your taxpayer identification number (usually your Social Security number), date of birth and zip code. If you have filed amended returns for more than one year, you can select each year individually to check the status of each.

Further Reference:

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Tax Tips if You’re Moving this Summer

If you make a work-related move this summer, you may be able to deduct the costs of the move. This may apply if you move to start a new job or to work at the same job in a new job location. The IRS offers the following tax tips on moving expenses you may be able to deduct on your tax return.

In order to deduct moving expenses, you must meet these three requirements:

  1. Your move closely relates to the start of work – Generally, you can consider moving expenses within one year of the date you first report to work at a new job location. Additional rules apply to this requirement.
  2. You meet the distance test – Your new main job location must be at least 50 miles farther from your former home than your previous main job location was. For example, if your old main job location was three miles from your former home, your new main job location must be at least 53 miles from that former home.
  3. You meet the time test – After you move, you must work full time at your new job location for at least 39 weeks during the first year. Self-employed individuals must meet this test and also work full time for a total of at least 78 weeks during the first 24 months upon arriving in the general area of their new job location. If your income tax return is due before you have satisfied this requirement, you can still deduct your allowable moving expenses if you expect to meet the time test.

If you can claim this deduction, here are a few more tips from the IRS:

  1. Travel – You can deduct transportation and lodging expenses for yourself and household members while moving from your former home to your new home. You cannot deduct the cost of meals during the travel.
  2. Household goods -You can deduct the cost of packing, crating and transporting your household goods and personal property. You may be able to include the cost of storing and insuring these items while in transit.
  3. Utilities – You can deduct the costs of connecting or disconnecting utilities.
  4. Nondeductible expenses -You cannot deduct as moving expenses any part of the purchase price of your new home, the costs of buying or selling a home, or the cost of entering into or breaking a lease. See Publication 521 for a complete list.
  5. Reimbursed expenses – If your employer reimburses you for the costs of a move for which you took a deduction, you may have to include the reimbursement as income on your tax return.

What you should know

  • To figure the amount of your deduction for moving expenses, use Form 3903.
  • When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive mail from the IRS. File Form 8822, Change of Address, to notify the IRS.

Further Reference :

 

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