The AOTC or American Opportunity Tax Credit be used for payments of qualified tuition and related costs made on or after January 1, 2022. This article talks about the eligibility of Under 24 Years old to American Opportunity Tax Credit.
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You can use the Lifetime Learning Credit to the same costs made on or after January 1, 2022. Payments made in 2022 for attendance periods that start in January–March 2023 can only be claimed on the Tax Return for 2022. If a taxpayer is claiming credit for the American Opportunity Tax Credit for a certain student, none of that student’s costs for the year would be covered can count toward the Lifetime Learning Credit.
How much money can a tax payer get back?
A taxpayer can get the American Opportunity Tax Credit if can get a credit of up to $2,500 for each student’s qualified tuition and related expenses paid during the taxable year. For the Lifetime Learning Credit, you can get a credit of up to $2,000 per tax return for qualified tuition and other related costs.
How does a student qualify? What do they have to do?
Each student in the taxpayer’s family (the taxpayer, the taxpayer’s spouse, or an eligible dependent) can get a credit for qualified tuition and related costs. You can apply the American Opportunity Tax Credit by student who is taking at least 6 credits, is in one of the first four years of college, and is enrolled in a program. that leads to a degree or certificate, and has never been convicted possession or sale of a controlled substance is a federal or state felony.
Students don’t have to be in their first two years of college to get the Lifetime Learning Credit, and they don’t have to be taking 6 credits or more. Most nonresident aliens can’t get either tax credit because they don’t live in the country.
Who is eligible to get the tax credit?
A person can claim the credit for his or her own qualified tuition and related expenses, as well as the qualified tuition and related expenses of his or her spouse and other eligible dependents (including children) for whom the dependency exemption is claimed. In general, a parent can claim the dependency exemption for an unmarried child if: 1) the parent provides more than half of the child’s support for the taxable year, and 2) the child is under 19 or a full-time student under 24.
Can a 24-year-old qualify for the American Opportunity Tax Credit?
Most taxpayers can get their money back for 40% of the American Opportunity Tax Credit (AOTC). But if you are under 24 at the end of the year and meet any of the following conditions, you can’t use any of the American Opportunity Tax Credit as a refundable tax credit. You can’t use any of the American Opportunity Credit as a refundable credit on your tax return if you were under 24 at the end of 2020 and you meet any of the following conditions. Instead, you can only use the part of your allowable credit that you can’t get back to lower your tax.
If you were a) under 18 at the end of 2020, b) 18 at the end of 2020 but your income only covered about half of your support, or c) over 18 but under 24 at the end of 2020 and a full-time student but your income only covered about half of your support, you wouldn’t be eligible for a refundable American Opportunity Tax Credit. Also, you wouldn’t be eligible if you didn’t file a joint return for 2020 and at least one of your parents was still alive at the end of the year.
What costs may be considered if a student pays eligible tuition and associated costs using a combination of a Pell Grant, a loan, a gift from a family member, and some personal savings?
Only out-of-pocket expenses may be used by the student to determine their credit. The American Opportunity Tax Credit amount is determined by taking into account qualified tuition and associated costs that were covered with the student’s wages, a loan, a gift, an inheritance, or personal savings. However, the credit amount does not take into account eligible tuition and associated costs paid with a Pell Grant or other tax-free scholarship, a tax-free payout from an Education IRA, or tax-free employer-provided educational assistance.
