Originally Posted by Claymore
I have $5500 to claim
The IRS offers you the option of claiming several different tax breaks for higher education costs, including the Lifetime Learning Credit, AOC credit or the Tuition and Fees Deduction. However, you can claim one of these tax breaks; 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 $7K in taxes, but have a $1.5K LLTC, you would only owe $5.5K. However, the LLTC 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 $900 in taxes, but have a $1.1K , 20%*$5.5k, LLTC, your tax liability would drop to $0 but you would not get a $200 refund. BUT The Tuition and Fees Deductions reduces your taxable income. The Tuition and Fees Deduction reduces AGI/TI/Tax liability based on your marginal tax rate while the Education Credits reduce your tax liability itself. If you are in a 15% tax bracket, then it would take 10k worth of deductions to equal 1.5k worth of credit.so, for most people, either the AOC or the LLTC will offer greater income tax savings. The AOC offers a maximum credit of $2.5K, which requires only $4K;$2k+25%*$2k of qualified expenses. TheLLTC offers a credit of 20 percent of up to $$5.5k in expenses, for a maximum credit of $1.1k IN YOUR CASE. The tuition and fees deduction allows you to deduct $4,000. Since it's a deduction, you have to multiply the deduction by your tax rate to figure the savings. For example, if you fall in the 30 percent tax bracket, a $5.5K deduction saves you $1.65K.HOWEVER, 40% OF YUR aoc IS TAX REFUNDABLVE ASLONGAS AOC>your tax liability.so u may receive up to $1k even if you owe no tax.