“I am pursuing my MBA and paid around $12,000 in tuition this year through loans. I also received $5,250 from my company as reimbursement. In researing I found that the only credit I qualify for is the lifetime learning credit. “---> Basically, you may be able to deduct qualified education expenses paid during the year for yourself. You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. Business school students can deduct education costs as "ordinary and necessary" expenses if their degree sustains or improves the skills necessary for their current career. If not, the expenses are considered personal. Generally, these rules mean that if you aren’t a lawyer or a doctor and you go to law or medical school, you can’t deduct the cost of your tuition. It turns out the rules for M.B.A.’s depend on whether individuals can prove that they were already established in a certain trade or business before going to get an M.B.A. and that the degree will help them maintain or improve their skills in that specific trade or business. And to actually get the deduction, if you aren’t one of the lucky ones who just sneaks past the I.R.S., you’ll need to be prepared to prove you qualify by being able to demonstrate your employment history and how the M.B.A. — down to the courses you take — will enhance your skills in your existing business. You’ll also need necessary documentation, like canceled checks and tuition bills.REMEMEBER: you cannot claim the tuition and fees tax deduction in the same taxable year that you claim the Lifetime Learning credit. ALSO,tuition deduction is temporary: 2011 is scheduled to be the last year that taxpayers can take this deduction.
“How would I report my tuition expense under lifetime learing credit. “-->The lifetime learning credit is a tax credit, which means that it directly decreases the amount of tax you owe. For example, if you owe $6,000 in taxes, but have a $1,500 Lifetime Learning tax credit, you would only owe $4,500. However, the LLC is a nonrefundable credit, meaning that if the credit exceeds the amount you owe, you will not receive the excess as a refund. For example, if you only owe $1,000 in taxes, but have a $1,500 LLC, your tax liability would drop to $0 but you would not get a $500 refund. To claim the LLC, you must fill out Parts III and V of Form 8863. The amount of the credit is then reported on form 1040 line 49 . LLC has Modified Adjusted Gross Income, limits on who can claim the deduction. The income limits can adjust each year with inflation. For the 2012 Lifetime Learning Credit, your credit is gradually reduced if your MAGI (It is your AGI increased by foreign income that was excluded, and by income excluded from sources in Puerto Rico or certain U.S. possessions.)is between $52K to $62K: Single, Head of Household, or Qualifying Widow. $104K to $124K : Married Filing JointlyIf your MAGI exceeds these limits, you cannot claim the Lifetime Learning Credit. The credit will reduce the amount of your tax liability.
“Would I have to deduct the $5250 from 12,000 I paid through loans or would I include the $5250 in income?”----------->No I don’t think so;you can’t deduct $5250rom your ER as reimbursement or you do not need to report it as income on your 1040 either. You can deduct your LLC up to $1,355;($12000-$5250)6750*20%;