Bills arriving for your new Florida college student? Tax credit could help, here's how

Lianna Norman, Palm Beach Post
·5 min read

With summer officially in the rear-view mirror and fall classes in full swing for college students, now is a good time to start thinking about what tax breaks you are eligible for as a college student or parent of a college student who you’re filing as a dependent in 2024.

On average, college students in Florida pay around $6,000 each year for tuition, according to FloridaShines.org, an online student hub for innovative educational services in Florida.

The American Opportunity Tax Credit, according to the IRS, “is a credit for qualified education expenses paid for an eligible student for the first four years of higher education.”

With the AOTC, eligible students can get a maximum annual credit of $2,500 each, which is about 42% of what the average college student in Florida pays for one year of tuition. If the credit brings the amount of tax you owe to zero, you can have 40% of the remaining amount of the credit (up to $1,000) refunded back to you.

Most students who are enrolled in a college, vocational school or university that participates in a student aid program with The Department of Education can apply for a refund to help pay for tuition, enrollment fees and learning materials.

“With higher education on the rise, education tax credits help offset the cost of attending school by reducing how much you owe on your tax return,” Monique McGrant, vice president at McGrant Tax and Bookkeeping told USA TODAY in February.

Here’s what you need to know about who qualifies for the American Tax Opportunity Credit and the difference between the AOTC and the Lifetime Learning Credit.

Who qualifies for the American Opportunity Tax Credit?

Here is the IRS’s list of qualifications for the American Opportunity Tax Credit:

  • The student must be pursuing a degree or other recognized education credential.

  • The student must be enrolled at least half-time for at least one academic period in the tax year.

  • The student must not have finished the first four years of higher education at the beginning of the tax year.

  • The student must not have claimed the AOTC (or the former Hope credit) for more than four previous tax years.

  • The student can’t have had a felony drug conviction by the end of the tax year.

It’s important to note that an academic period doesn’t encompass the whole school year. According to the IRS, an academic Period can be semesters, trimesters, quarters or any other period of study determined by the school. For schools that don’t use academic terms and instead use credit hours, the payment periods are treated as academic periods.

More on tax credits: How to lower your taxes next year

Who doesn’t qualify for the American Opportunity Tax Credit?

You are not eligible to apply to the American Opportunity Tax Credit if your income is above $80,000 each year, or $160,000 for spouses filing jointly.

Get a tax break for being a student: What is an education tax credit?

Should I claim an American Opportunity Tax Credit as a student?

You can claim the American Opportunity Tax Credit as a student if your parents or legal guardians are not claiming you as a dependent on their taxes and if you don't meet the disqualification criteria above. If your parents or legal guardians are claiming you as a dependent, they can apply for the American Opportunity Tax Credit on your behalf.

If you have a spouse, they can claim the credit using the married filing jointly status.

According to the IRS, "If you claim the American opportunity credit even though you're not eligible, you may be banned from claiming the credit depending on your conduct."

The AOTC is only available to be used for one academic period in each of the first four years of your education after high school, meaning graduate school students or those pursuing higher than a Bachelor’s degree cannot use it for any schooling following their undergraduate studies.

Should I claim the American Opportunity Credit or the Lifetime Learning credit?

The Lifetime Learning Credit, a different educational tax credit, has a little more flexibility than the AOTC. If you’ve claimed one of these credits, you can’t claim the other for the same tax year, meaning you can’t benefit or get refunds from both of these tax credits at the same time.

The Lifetime Learning Credit extends to taxpayers who are in post-graduate programs. It isn’t just for undergraduate students like the American Opportunity Credit is.

According to the IRS, “This credit can help pay for undergraduate, graduate and professional degree courses — including courses to acquire or improve job skills. There is no limit on the number of years you can claim the credit. It is worth up to $2,000 per tax return.”

Here is the IRS’s list of qualifications for the Lifetime Learning Credit:

  • The student must be enrolled or taking courses at an eligible educational institution.

  • The student must be taking higher education courses to get a degree or other recognized education credential or to get or improve job skills.

  • The student must be enrolled for at least one academic period beginning in the tax year.

Unlike the AOTC, the LLC is not a refund. This means that you can use the credit you get from the Lifetime Learning Credit to pay any taxes you owe but you can’t receive any of the credit back as a refund to help pay for other things like books and tuition.

The LLC has the same income restrictions as the American Opportunity Tax Credit. If you make more than $80,000 each year, or $160,000 if you’re filing jointly, you don’t qualify to benefit from this education credit.

This article originally appeared on Palm Beach Post: Who qualifies, how to apply for the federal college tax credit