Monday, January 26, 2015

What You Need to Know about the American Tax Credit

If you’re thinking about heading to school or if you’re sending a child off to college, you need to know about the American opportunity tax credit. This credit is good for students who pay taxes and can help them to supplement the high cost of a college education. The credit reduces the taxes owed based on the amount of money spent So, the more one spends on college, the higher the credit.


Eligibility Requirements

As with most credits, there are strict eligibility requirements that must be met in order to receive this credit. They include:

l  The student must not have completed four years of schooling.
l  The student must be enrolled in college for at least one semester during the tax year.
l  The student must meet the college’s eligibility requirements for part-time enrollment.
l  The program in which the student is enrolled must end in a degree or certificate.
l  The student must not have ever been convicted of a drug related crime.
l  The person applying for the credit must be paying some or all of the educational tuition and fees.
l  The student must be enrolled in a qualifying college or post-secondary school.


The American Opportunity Credit and Financial Aid

Most students will receive some type of financial aid to help fund their education. This may include loans, scholarships, grants, and aid offered by the institution itself. The good news is that any borrowed funds can be counted toward the credit since they will eventually have to be repaid. However, aid that does not have to be repaid does not count toward the credit.

Dependents

Each eligible student is entitled to receive one tax credit and no more. For parents who are claiming the credit on behalf of dependent’s expenses, the same credit must be used for both dependents.

Obviously, there are a lot of rules and requirements for obtaining this tax credit. However, the credit is substantial and well worth the effort put in. While it is possible to fill out the tax credit forms on one’s own, most people find it a lot easier to do with the help of a qualified accountant