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FAQ - Tax Credits

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General Tax Credit Questions

Who is an eligible dependent for claiming qualified educational expenses?

An eligible dependent is a person for whom you can claim a dependency exemption.

This generally includes your unmarried child who is under the age of 19 or who is a full-time student under the age of 24, if you supply more than half the child's support for the year.

Who receives the American Opportunity and Lifetime Learning tax credits?

The American Opportunity and Lifetime Learning tax credits result in a reduction of the annual federal income tax owed by the taxpayer(s) who claim the student as their dependent.

This tax credit may lead to a refund of previously paid federal income tax.

What payments are considered qualified for tax credits and tax deduction?

Qualified payments for calculating tax credits/deductions include the following:

  • Personal earnings
  • Personal savings
  • Loans
  • Gifts
  • Inheritance

Ineligible payments for calculating tax credits/deductions:

  • Grants
  • Scholarships
  • Tax-free distributions from an Education IRA
  • Tax-free employer provided educational assistance
  • Other forms of financial aid (which you are not required to repay)

What type of circumstance would impact my eligibility to claim an educational tax credit or a deduction for educational expenses?

You may have received nontaxable grants or scholarships, tax-free distributions from an Education IRA, or tax-free employer provided educational assistance that may need to be deducted from qualified expenses to calculate the credit amount.

Can I claim an American Opportunity, or Lifetime Learning tax credit or the Deduction for Higher Educational Expenses for qualified tuition and related expenses paid in advance of when the academic period begins?

Generally, the credit/deduction is available only for payments of qualified tuition and related expenses that cover an academic period beginning in the same calendar year in which the payment was made. An exception, however, allows the taxpayer to claim a tax credit/deduction for payment of qualified tuition and related expenses made during the tax year for the academic period January, February, and March of the following year. Consult your tax preparer/consultant for tax return preparation advice.

What is Penn State’s federal tax ID number?

Penn State’s federal tax ID number is 24-6000376.

What are the income limitations for learning/educational tax credits?

The amount a taxpayer may claim, for both the American Opportunity and Lifetime Learning tax credits is gradually reduced where the modified adjusted gross income (MAGI) is higher than $80,000 for single taxpayers and $160,000 for joint filers. A taxpayer whose MAGI is greater than $90,000 ($180,000 for joint filers) cannot benefit from this credit.

Similarly, the amount a taxpayer may claim, for the Lifetime Learning Credit may be reduced for high income taxpayers. The Lifetime Learning Credit is gradually reduced where modified adjusted gross income (MAGI) is higher than $55,000 for single taxpayers and $111,000 for joint filers. A taxpayer whose MAGI is greater than $65,000 ($131,000 for joint filers) cannot benefit from this credit.

If you are married filing a separate tax return, you cannot claim the credit.

For the Deduction for Higher Education Expenses, the income limitation is MAGI of not more than $80,000 ($160,000 on a joint return).

How do I find out the amount of my qualified tuition and related expenses?

Please refer to the IRS guidelines on Qualified Education Expenses. Penn State cannot provide individual tax advice; you should consult with your tax adviser about your specific circumstances.

Is the amount of qualified tuition and related expenses the total amount of the tax credit I can claim on my tax return?

Not in all situations. The amount of the tax credit that you may claim will depend on your individual situation. The IRS is providing instructions on the application of the 1098-T information and eligibility requirements for the new tax credits.

Please consult your tax preparer/consultant to determine how the American Opportunity and Lifetime Learning tax credits and the Deduction for Educational Expenses affect you.