Child and Dependent Care Credit & Flexible Benefit Plans
This is archived information that pertains only to the 2002 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
Can I claim the Child and Dependent Care Credit?
If you paid someone to care for your dependent under age 13 or your disabled dependent or spouse so that you could work or look for work, you may be able to claim the credit for child and dependent care expenses. For specific information on how to qualify for this credit refer to Tax Topic 602, Child and Dependent Care Credit, or Publication 503 (PDF), Child and Dependent Care Expenses.
References: My spouse and I both work and are eligible for the Child and Dependent Care Credit. May I include my 5 year old son's parochial school kindergarten tuition cost as a qualified expense in Form 2441, Child Care Expenses?
The expenses for kindergarten do not qualify for the dependent care credit if the kindergarten is primarily educational in nature. Expenses for school in the first grade or higher do not qualify for the credit. However, you can count the part of the expenses of sending your child to school that is for your child's care if it can be separated from the expenses of education. For example, you may count the cost of an after school care program even though the school tuition does not qualify.
References: I paid into a dependent care benefits plan and the amount is shown in Box 10 of my Form W-2. However, the cost paid to the child care provider was more. Can the additional expense not paid into the dependent care benefits plan and not shown in Box 10 of the W-2 be claimed on Form 2441?
That depends on the amount you elected to have contributed to the flexible spending arrangement. The exclusion from income for employer-provided benefits can be as high as $5,000, while the credit for dependent care expenses is based on annual dollar limits of $2,400 for one person and $4,800 for two or more persons. You must reduce those dollar limits by the amount of excludible dependent care benefits. If you had expenses that you paid yourself and the employer provided benefits were less than the applicable dollar limit, you can also claim the credit. Complete Part III of either Form 2441 (PDF), Child and Dependent Care Expenses, or Form 1040A, Schedule 2 (PDF), Child and Dependent Care Expenses for Form 1040A Filers, to determine the excluded benefits and whether you can claim the credit.
Future Change. The applicable percentage and allowable employment-related expenses increase beginning in 2003. The maximum applicable percentage will be increased to 35 percent and the allowable employment-related expenses will be increased to $3,000 for one qualifying child and $6,000 for two or more qualifying children (Code Sec. 21, as amended by the Economic Growth and Tax Relief Reconciliation Act of 2001). Thus, the maximum credit will rise to $1,050 for one qualifying child and $2,100 for two or more qualifying children.
References: If my employer did not put the amount I paid into a flexible spending account for dependent care in box 10 on my Form W-2, can I claim the Child and Dependent Care Tax Credit?
If the omission was simply a clerical oversight, you may not claim the child care credit. If the flexible spending account was an eligible plan under Internal Revenue Code Section 125, the amount of the salary reduction that was contributed to your account should appear in box 10 of your Form W-2. Request a corrected Form W-2 from your employer.
You may claim the child care credit if the contribution to your flexible spending account was less than your annual dollar limitation for eligible expenses ($2,400 for one person, or $4,800 for two or more persons). Even if you cannot claim the credit, you must complete Part III of either Form 2441 (PDF), Child and Dependent Care Expenses, or Form 1040A, Schedule 2 (PDF), Child and Dependent Care Expenses for Form 1040A Filers, to exclude your employer provided benefits from your income. If the amount you paid into a flexible spending account reduced your wages in box 1 of Form W-2, it is considered an employer provided benefit.
References: I was under the impression that a Dependent Care Benefit Plan would benefit me, not penalize me with an increase in taxes. How can my employer say they provided a benefit in the total amount of $3,000 in W-2, Block 10 when I had $3,000 in wages set aside for dependent care benefits?
The actual mechanism for this type of plan is an agreement to voluntarily reduce your salary in return for an employer-provided fringe benefit. These plans must be set up this way because you have a choice of whether to receive the cash wages or the benefits, which would make the benefit taxable to you. Therefore, the benefits are actually employer provided or funded. You are receiving a tax benefit because you are not paying taxes on the money that is set aside.
References: How do I complete Form 2441 if I have flexible dependent care benefits through my employer?
You must complete Part III of Form 2441 (PDF), Child and Dependent Care Expenses, (or Form 1040A, Schedule 2 (PDF), Child and Dependent Care Expenses for Form 1040A Filers) to claim the exclusion of the benefits from income even if you cannot claim the credit. Enter your total employer-provided dependent care benefits on line 10 (this amount should appear in box 10 of your Form W-2) and your qualified expenses on line 13. The last five lines of Part III will determine whether you can also take the credit and what your dollar limit is on qualified expenses. Also Complete Part I, Persons or Organizations Who Provided the Care.
References: I am self-employed, but did not have a net profit last year. Is it correct that we do not qualify for the Child Care Credit on our joint return even though my wife received dependent care benefits on her W-2 box 10?
Generally, yes. When you complete Part III of Form 2441 (PDF), Child and Dependent Care Expenses, which you must do to claim excluded benefits, line 17 asks you to enter the smallest of: - your dependent care benefits,
- your qualified expenses,
- your earned income, or
- your spouse's earned income.
If you had a loss from self-employment and no other earned income, your earned income would be $0, unless you can use one of the optional methods on Form 1040, Schedule SE (PDF), Self-Employment Tax. That would mean that the amount in box 10 of your wife's Form W-2 would have to be included in income. (For more information on the optional methods of computing self-employment tax, refer to Publication 533 (PDF), Self-Employment Tax, or Instructions for Form 1040, Schedule SE, Self-Employment Tax.
The income considered to be earned by a spouse who is a full-time student or who is incapable of self-care is $200 per month if there's one qualifying individual in the household, and $400 a month if there are two or more qualifying individuals. However, this income is deemed to be earned only by one spouse for any given month. (Code Sec. 21 (d) (2)).
References: Is a flexible spending account for dependent care a dependent care benefit?
Yes. If the flexible spending account is providing you with a dependent care benefit, then it should be reported in box 10 of your Form W-2. These accounts are funded through a salary reduction, so the contribution to the account is considered an employer contribution. When you receive a dependent care benefit from your employer, you must complete Part III of Form 2441 (PDF), Child and Dependent Care Expenses, (or Form 1040A, Schedule 2 (PDF), Child and Dependent Care Expenses for Form 1040A Filers) to see if the benefits are fully excluded from income. You may be able to also claim a credit for child and dependent care expenses if the excluded benefits are less than the dollar limit on qualified expenses for the credit.
References: My divorce decree states that my ex-spouse can claim our daughter as an exemption on alternate years. I am the custodial parent and pay child care expenses. Can I claim child care expenses on the years he takes the exemption?
The Child and Dependent Care Credit can only be claimed by the custodial parent. This is true even if you cannot claim the child's exemption because the divorce decree allows the other parent to claim the exemption, or you have released the exemption on Form 8332. Refer to Publication 503 (PDF), Child and Dependent Care Expenses, for a complete discussion.
References: My babysitter refused to provide me with her social security number. Can I still claim what I paid for child care on my taxes while I worked? If so, how?
Yes, assuming that you already meet the other requirements to claim the child care credit, but are missing the required ID number of the provider, you can still claim the credit by demonstrating "due diligence" in attempting to secure the needed information.
When the care provider refuses to give the identifying information, the taxpayer can still claim the credit and is instructed to provide whatever information is available about the provider (such as name and address) on the form used to claim the credit ( Form 2441 (PDF), Child and Dependent Care Expenses, or Form 1040A, Schedule 2 (PDF), Child and Dependent Care Expenses for Form 1040A Filers). The taxpayer should write "see page 2" in the columns calling for the missing information. He/she would write at the bottom of page 2 that the provider refused to give the requested information. This statement will show that the taxpayer used due diligence in trying to secure and furnish the necessary information.
References: As a child care center, are we required to give out tax statements to any of our parents who request one? Can we refuse to give a tax statement to someone who has a past due balance with us?
As a care provider, you are required to give your correct name, address, and Taxpayer Identification Number (TIN) to customers who paid for child care services during the year. A valid TIN can be the Employer Identification Number (EIN) of the business or the social security number of a sole proprietor. Form W-10 (PDF), Dependent Care Provider's Identification and Certification, or a similar statement may be used for such purposes.
A care provider who does not give the customer a correct TIN is subject to a penalty of $50 for each failure unless the failure is due to reasonable cause and not willful neglect. The failure of a customer to pay a bill in full would not normally constitute reasonable cause. The penalty does not apply to qualified tax exempt care providers.
When the care provider refuses to give the identifying information, the taxpayer can still claim the credit and is instructed to provide whatever information is available about the provider (such as name and address) on the form used to claim the credit ( Form 2441 (PDF), Child and Dependent Care Expenses, or Form 1040A, Schedule 2 (PDF), Child and Dependent Care Expenses for Form 1040A Filers). The taxpayer should write "see page 2" in the columns calling for the missing information. He/she would write at the bottom of page 2 that the provider refused to give the requested information. This statement will show that the taxpayer used due diligence in trying to secure and furnish the necessary information.
References: I am thinking of having an au pair take care of my child. There is a $4,000 fee up front and I will be paying $150 a week to the au pair. What, if any, of this qualifies for the child and dependent care credit is deductible?
The up front fee may qualify as a child care expense if it is an expense you must pay in order to obtain care. However, you can only count it toward the credit proportionately over the duration of the agreement to employ the au pair. The $150 per week as well as other work related expenses may qualify as a child and dependent care expense. Please refer to Publication 503 (PDF), Child and Dependent Care Expenses for a full discussion.
If your au pair works in your home, you may also be responsible for employment taxes. Refer to Publication 926 (PDF), Household Employers Tax Guide, for more information.
References: If I send my child who was under the age of 13 to a day camp instead of a child care facility for the summer, are these deductible expenses?
The cost of day camp, including a camp that specializes in a particular activity such as soccer or computers, may qualify as child care expense, if your main purpose in sending your child is to assure the child's well-being and protection.
References: I am thinking of having a family member baby-sit for my child full time in their own home while I work. Are either of us responsible for taxes on the money I would pay? Can I claim this money as a child care expense even though my family member is not a registered day care provider?
You may have qualified child care expenses if the family member baby-sitting is not your dependent or your child under age 19 and you meet all the tests to claim the Child and Dependent Care Credit. Your family member will be responsible for paying taxes on the money earned and will be considered to be self-employed.
References: Can elderly day care payments qualify for the child and dependent care credit?
Elderly day care payments may qualify as Child and Dependent Care Expenses. In order to be a qualifying person, the person receiving the elderly day care must be either your spouse who was physically or mentally not able to care for himself or your dependent who was physically not able to care for himself and for whom you can claim an exemption (or could claim an exemption except the person had $3,000 or more of gross income in the year 2002) (for 2003, gross income of $3,050 or more). All of the other criteria for claiming the Child and Dependent Care Credit must also be met.
References: 7.2 Child Care Credit/Other Credits: Child Tax Credit Can a custodial parent claim the Child Tax Credit if the noncustodial parent claims the child as a dependent due to the divorce agreement?
The custodial parent cannot claim the Child Tax Credit for a child in the tax year that the noncustodial parent takes the exemption for that child. Please refer to the 1040 Instruction Booklet index for the Child Tax Credit. The referenced pages will explain who qualifies for this credit and how to calculate it.
References: Does the Form 8332 (used to release the exemption to the noncustodial parent) affect the Child Tax Credit?
Yes. The Child Tax Credit can only be claimed by the parent claiming the exemption. In this case the noncustodial parent would qualify for the dependency exemption and therefore the child tax credit. Please refer to the Instructions for Form 1040 or the Instructions for Form 1040A index for Child Tax Credit. The referenced pages will explain who qualifies for this credit, and how to calculate it.
References: Can you file for the Child Tax Credit and the Child Care Credit, too?
The Child Tax Credit and the Child and Dependent Care Credit can both be claimed on the same return. They can be claimed on either Form 1040 (PDF), U.S. Individual Income Tax Return, or Form 1040A (PDF), U.S. Individual Income Tax Return. Please refer to the Instructions for Form 1040 or the Instructions for Form 1040A index for the Child Tax Credit. The referenced pages will explain who qualifies for the Child Tax Credit, and how to calculate it. Publication 503 (PDF), Child and Dependent Care Expenses, has more information for the child care credit.
References: If I file using filing status married filing separately, can I still claim the Additional Child Credit?
Yes. You will need to complete Form 8812 (PDF), Additional Child Tax Credit, and attach it to your Form 1040 or 1040A. Please refer to the Instructions for Form 1040 or the Instructions for Form 1040A index for the Child Tax Credit. The referenced pages will explain who qualifies for the Child Tax Credit, and how to calculate it.
References: Does a grandchild, who is a dependent, qualify for the Child Tax Credit?
Your grandchild under the age of 17 who is your dependent and is a U.S. citizen or resident alien is a qualifying child for the child tax credit. Please refer to the Instructions for Form 1040 or the Instructions for Form 1040A index for the Child Tax Credit. The referenced pages will explain who qualifies for the Child Tax Credit, and how to calculate it.
References: Can I get the Child Tax Credit for a child with an ITIN, not a social security number?
Yes, with an individual tax identification number (ITIN), you can claim the Child Tax Credit if you otherwise qualify. The Child Tax Credit can only be claimed by the parent claiming the child as a dependent.
Please refer to the Instructions for Form 1040 or the Instructions for Form 1040A index for the Child Tax Credit. The referenced pages will explain who qualifies for the Child Tax Credit, and how to calculate it.
References: My child lived for only 12 days and I never received a social security number, because the Social Security Administration will not issue a social security number for a deceased child. Can I still qualify for the Child Tax Credit?
Yes, you may attach a copy of the child's birth certificate and enter "DIED" in column 2 of line 6c. You will also need to put a check mark in column 4 of line 6c. Please refer to the Instructions for Form 1040 or the Instructions for Form 1040A index for the Child Tax Credit. The referenced pages will explain who qualifies for the Child Tax Credit, and how to calculate it.
References: 7.3 Child Care Credit/Other Credits: Credit for the Elderly or the Disabled Can I get the Credit for the Elderly or the Disabled?
Generally, if you were age 65 or older or disabled and your income and nontaxable social security and other nontaxable pension are below specified amounts, you may be able to take this credit. For more details, refer to Tax Topic 603, Credit for the Elderly or the Disabled, or Publication 524 (PDF), Credit for the Elderly or the Disabled.
References: 7.4 Child Care Credit/Other Credits: Hope & Life Time Learning Educational Credits What are the education credits?
There are two credits available, the Hope Scholarship Credit and the Lifetime Learning Credit.
References: How does the Lifetime Learning Credit different from the Hope Credit?
Unlike the Hope Credit: - The Lifetime Learning Credit is not based on the student's workload. It is allowed for one or more courses.
- The credit is not limited to students in the first 2 years of postsecondary education.
- Expenses for graduate level degree work are eligible.
- There is no maximum period for which the credit can be claimed for each eligible student.
- The amount you can claim as a credit does not vary (increase) based on the number of eligible students for whom you pay qualified expenses.
References: How many education credits can I claim?
You can claim only one of the credits for each eligible student per tax year.
References: I finished my college sophomore year in June and began my junior year in September. Can I take both the Hope and Lifetime Learning Credit in that year?
No, you cannot take both credits in one year for the same student. However, eligibility for the Hope Credit depends on your status at the beginning of the calendar year. If you are classified as a second-semester sophomore during the spring semester and as a first-semester junior during the fall semester of that same year, the qualified expenses you pay for the fall semester may be taken into account for the Hope Credit because you had not completed the first 2 years of your secondary education when the year began.
References: - Publication 970 (PDF), Tax Benefits for Higher Education
- Tax Topic 605, Education credits
- Ref (p. 35 of 8/28/01 S 25A draft final regs (ex 3); 25A (b) (2) (c) )
How is the amount of the Hope or Lifetime Learning Credit determined?
The amount of the credit is determined by the amount you pay for qualified tuition and related expenses paid for each eligible student and the amount of your modified adjusted gross income (AGI).
References: What expenses qualify for the education credits?
Expenses that qualify are tuition and fees required for enrollment or attendance at any college, vocational school, or other postsecondary educational institution eligible to participate in the student aid programs administered by the Department of Education.
Qualified expenses do not include books, room and board, student activities, athletics (unless the course is part of the student's degree program), insurance, equipment, transportation, or other similar personal, living, or family expenses. The cost of books and equipment are generally not qualified expenses because eligible educational institutions usually do not require that fees for such books or equipment be paid to the institution as a condition of the student's enrollment or attendance at the institution.
References: Are expenses to attend private high schools eligible for the education credits ?
No. Expenses paid to attend high school do not qualify for the education credits because a high school is not an eligible educational institution. An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. It includes virtually all accredited, public, nonprofit, and proprietary (privately owned profit making) postsecondary institutions.
References: Many high school seniors are also enrolled in colleges for dual academic credits. Are the fees paid to the college eligible for one of the education tax credits?
Expenses paid for college courses taken while attending high school may qualify for the Hope Scholarship Credit or for the Lifetime Learning Credit if the student otherwise meets the qualifications for claiming either of the credits.
References: How do I know if my school is eligible to participate in the education credits?
The educational institution should be able to tell you if it is an eligible educational institution.
References: Do I have to be enrolled in college to get the Hope education credit?
Yes. One qualification to claim the Hope credit is that the student be enrolled in college for at least one academic period beginning in the taxable year.
References: If I put money aside in a college savings plan for my two children, is that money eligible for either the Hope or Lifetime Learning Credit?
No, an education credit is claimed in the year in which the expenses are paid, not in the year in which money is set aside in a college savings plan. You may want to consider setting up an Educational IRA. For more information, refer to Publication 970 (PDF), Tax Benefits for Higher Education.
References: Can I claim an education credit if I am married but file separately?
No. Neither the Hope Credit nor the Lifetime Learning Credit can be claimed if the individual is married but filed a separate return.
References: How do I claim the education credits?
The education credits are claimed on Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits), which is attached to your Form 1040 or Form 1040A.
References: If I pay college tuition and fees with a scholarship, can I claim an education credit on Form 8863 for those payments?
No. You cannot claim a credit for the amount of higher education expenses paid for by tax-free scholarships.
References: If the amount of qualified tuition and fees I pay is greater than the amount of my scholarship, should I fill out Form 8863? If I cannot use Form 8863 because I received a scholarship, what can I do?
You must reduce the qualified expenses by the amount of any tax-free educational assistance. Do not reduce the qualified expenses by amounts paid with the student's earnings, loans, gifts, inheritances, and personal savings. Also, do not reduce the qualified expenses by any scholarship reported as income on the student's return or any scholarship which, by its terms, cannot be applied to qualified tuition and related expenses.
References: How can I get a Form 8863?
You can download this form and the instructions from the Forms & Pubs section of our web site. You may also call 1-800-829-3676.
References: Why did I get Form 1098-T?
The information on Form 1098-T may help you determine whether you can claim an education tax credit.
References: Who issues the Form 1098-T?
An eligible educational institution that receives payment of qualified tuition and related expenses generally must issue Form 1098-T, Tuition Payments Statement, to each student by January 31st.
References: What information is on Form 1098-T?
The following information should be included on the form. - The name, address, and taxpayer identification number of the educational institution.
- The name, address, and taxpayer identification number of the student.
- Whether the student was enrolled for at least half of the full-time academic workload for at least one academic period.
- Whether the student was enrolled exclusively in a graduate-level program
References: I am currently going to school and I received a Form 1098-T. What is this form? How can I claim an education tax credit?
An eligible educational institution (such as a college or university) that receives payment of qualified tuition and related expenses generally must issue Form 1098-T, Tuition Payments Statement, to each student by January 31st. You may be able to claim a credit for these expenses by completing Form 8863 (PDF), Education Credits, and attaching it to your Form 1040.
References: Do I need to receive a Form 1098-T, Tuition Payments Statement, from my children's colleges before I can file for the Hope Scholarship Credit and the Lifetime Learning Tax Credit?
No, there is no requirement that you receive this form before you can claim these credits.
References: If tuition was paid by a government subsidized loan, can I still take the Hope or Lifetime Learning Credit?
If you take out a loan to pay higher education expenses, those expenses may quality for the credit if you will be required to pay back the loan. The credit is claimed in the year in which the expenses are paid, not in the year in which the loan is repaid.
References: If education expenses were paid by a school loan, that the student has not began paying back, do the expenses still qualify for the Hope or Lifetime Learning Credits?
The rule for a school loan is the same as the rule for a government subsidized loan. Even though the loan proceeds are not income to you, expenses paid from the loan proceeds may qualify for the Hope or Lifetime Learning Credit if the loan must be repaid. The education credit is claimed in the year in which the expenses are paid, not in the year in which the loan is repaid.
References: I filed my tax return via TeleFile and then I received a form from my school stating that I was eligible for the Hope Scholarship and Lifetime Learning Credits. What do I do now?
To claim the credit, you will need to file Form 1040X (PDF), Amended U.S. Individual Income Tax Return, and attach Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits).
References: Can I use a 1040EZ if I am going to claim education credits?
No, you must use either Form 1040A or Form 1040 along with Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits), to claim the credit.
References: If I want to take an education credit for my child, do I also have to claim my child as a dependent?
Yes, you must claim your child as a dependent to take either of the education credits. If you claim an exemption for your child on your tax return, only you can claim the credit.
References: A divorced father pays college tuition directly to the college for his child who is claimed as a dependent on his ex-wife's return. Is the divorced father eligible for either of the educational credits - Hope or Lifetime Learning?
No. The divorced father cannot claim an educational credit because he does not claim the child as a dependent. The ex-wife, however, can claim an educational credit because she is claiming the child as a dependent and, under a special rule, is treated as having paid the child's tuition. The child cannot claim the credit because he is being claimed as a dependent on his mother's return.
References: What is a Hope Credit?
It is a nonrefundable tax credit for a student's first 2 years of undergraduate education.
References: Who can claim the Hope Credit?
You can claim a Hope Credit for an eligible student who is: - Enrolled in one of the first 2 years of postsecondary education (generally freshman or sophomore years of college).
- Enrolled in a program that leads to a degree, certificate, or other recognized educational credential.
- Taking at least one-half of the normal full-time workload for the course of study for at least one academic period beginning during the calendar year.
- Free of any felony conviction for possessing or distributing a controlled substance (drugs).
An eligible student can be you, your spouse, or an eligible dependent
References: What is the amount of the Hope Credit?
The maximum credit per student is $1,500 (100 percent of the first $1,000 of qualified tuition and related expenses, plus 50 percent of the next $1,000 of such expenses).
References: I understand for the Hope Credit I must be in my first 2 years of college. Does that mean I can take the credit if I am ranked as a freshman or a sophomore even if I have been attending college for more than 2 years?
The Hope Credit may be claimed for no more than 2 taxable years and may not be claimed if at the beginning of the taxable year the student has completed the first 2 years of postsecondary education at an eligible educational institution. If the student has not claimed a Hope Credit for more than 1 year and if the educational institution at which the student is enrolled ranks the student as being less than a first-semester junior at the beginning of the year, the student may be eligible to claim the Hope Credit.
References: Is tuition paid to a foreign university eligible for the Hope Credit?
Relatively few, postsecondary institutions located outside of the United States participate in a student aid program administered by the Department of Education. Therefore, tuition paid to a foreign university usually does not qualify for either of the education credits. The educational institution should be able to tell you if it is an eligible educational institution.
References: I will be able to claim the Hope Credit. What records do I need to claim this credit?
You should keep all your canceled checks that were used to pay for the qualifying expenses and any other documentation showing the amount of tuition and fees paid.
References: I am currently attending school for a second bachelor's degree. I completed my original degree several years ago. Am I eligible for the Hope Credit because I am just entering my second year of this bachelor's degree program?
No. Since you have already completed your first 2 years of postsecondary education, the courses that you are now taking do not qualify for the Hope Credit. However, you may be eligible for the Lifetime Learning Credit.
References: I have returned to college after several years. I attend a community college and have not received an associate's degree as of yet. Can I claim the Hope Credit for tuition I paid this year?
You can only claim the Hope Credit if at the beginning of the year, you are not classified as having completed the first 2 years of postsecondary education.
For example, if you attended classes for only one or two semesters, you would still be in your first 2 years of post secondary school. Generally if you attended five or more semesters, you would not be considered in your first 2 years of post secondary school even if you have not attained your associate's degree.
If you don't qualify for the Hope Credit, you may qualify for the Lifetime Learning Credit.
References: What is a Lifetime Learning Credit?
A nonrefundable tax credit up to $1,000 per family for all undergraduate and graduate level education.
References: Who is eligible for the Lifetime Learning Credit?
An eligible student can be you, your spouse, or an eligible dependent. In any one tax year, only one person can claim a higher education credit for a student's expenses.
References: I'm a full-time graduate student and am required pay a comprehensive fee as part of my enrollment. This fee includes student center fees, health fees, bus fees, and athletic fees. Does this comprehensive fee qualify for the Lifetime Learning Credit?
If a student is required to pay a comprehensive fee to an eligible educational institution that includes charges for tuition, fees, and personal expenses, the portion of the comprehensive fee allocable to personal expenses is not eligible for the credit. The allocation must be made by the institution using a reasonable method.
References: Is the Lifetime Learning Credit used only to reduce the tax people owe or may it give me a refund even if I do not owe any tax?
Both the Hope Credit and the Lifetime Learning Credit are nonrefundable credits. This means that the credits may reduce your federal income tax liability down to zero. However, if you do not owe any tax, the credits will not result in a refund.
References: Can the Lifetime Learning Credit be used for a high school student taking classes at an approved college prior to graduation from high school?
College courses taken while attending high school may qualify for the Hope Scholarship Credit or for the Lifetime Learning Credit if the student meets the qualifications for claiming either of the credits.
References: What information on this Form 1098-T statement from my university do I use to figure my Lifetime Learning Credit?
If you claim an education credit, keep Form 1098-T with your tax records. The information on the form will not be used to figure the amount of your credit. Instead, use Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits), to calculate your credit.
References: Can nonresident aliens claim the Lifetime Learning Credit for tuition paid to go to school?
If you are a nonresident alien for any part of the year, you generally cannot claim the education credits. However, if you are married and choose to file a joint return with a U.S. citizen or resident spouse, you may be eligible for the Hope or Lifetime Learning Credit.
References: I did not attend school this year, but made loan payments on a loan I previously took out to pay my college tuition. Can I claim a lifetime credit for the money I used to repay the loan?
No, payments on your student loans do not qualify for the Lifetime Learning Credit. However, interest on student loans may be deductible for Federal income tax purposes if you meet certain conditions. For more information, refer to Publication 970 (PDF), Tax Benefits for Higher Education.
References: I am a student who is claimed as a dependent on my parent's tax return. I pay my college tuition out of my own earnings. Can I take the Lifetime Learning Credit on my tax return?
No, if your parents claim you as a dependent, you cannot claim either of the education credits. However, any qualifying tuition payments that you made can be claimed by your parents as paid by themselves and may qualify them for the Hope or Lifetime Learning Credit.
References: Am I eligible to claim both my job education expenses (minus 2 percent of AGI) and the Lifetime Learning Credit on my taxes?
You can not deduct educational expenses and claim a credit for the same expenses. You must choose one or the other.
References: If my employer reimbursed my education expenses and included the reimbursement in my taxable income, is the amount still eligible for the Lifetime Learning Credit?
The amount included as taxable income is eligible for the Lifetime Learning Credit. If your tuition is paid by your employer but is not included in your taxable income, then the amount of the tuition is ineligible for the education credit. This is because double tax benefits are not allowed.
References: I am trying to understand what is a qualified expense under the Lifetime Learning Credit. The guidelines state books are included in qualified expenses only if the fee must be paid to the institution as a condition of enrollment or attendance at the institution. I am required to have books for classes that I am taking, and I purchased the books from the college bookstore. Can I add the cost of these books to my qualified expenses?
In general, an educational credit is not available for expenses incurred to pay for books. The Federal Income Tax Regulations provide an example that may be helpful: First-year students at College W are required to obtain books and other reading materials used in its mandatory first-year curriculum. The books and other reading materials are not required to be purchased from College W and may be borrowed from other students or purchased from off-campus bookstores, as well as from College W's bookstore. College W bills students for any books and materials purchased from College W's bookstore. The fee that College W charges for the first-year books and materials purchased at its bookstore is not a qualified tuition and related expense because the books and materials are not required to be purchased from College W for enrollment or attendance at the institution.
References: 7.5 Child Care Credit/Other Credits: Other Credits I heard there is a credit for hiring certain groups of workers, such as veterans or ex-felons. Is that the same thing as the Work Opportunity Tax Credit?
The work opportunity credit provides an incentive to hire individuals from targeted groups that have a particularly high unemployment rate or other special employment needs. The credit can be as much as 40% of the qualified wages you pay to individuals who begin work for you after September 30, before January 1, 2002. The credit can be claimed by filing Form 5884 (PDF), Work Opportunity Credit.
An individual is a member of a targeted group if he or she is a: - Qualified recipient of Aid to Families with Dependent Children (AFDC) or successor program.
- Qualified veteran.
- Qualified ex-felon.
- High-risk youth.
- Vocational rehabilitation referral.
- Qualified summer youth employee.
- Qualified food stamp recipient.
- Qualified SSI recipient.
An individual is not considered a member of a targeted group unless your state employment security agency certifies him or her as a member. This certification requirement can be satisfied in either of two ways: - On or before the day on which the individual begins work for you, you have received a certification from your state employment security agency that the individual is a member of a targeted group, or
- On or before the day you offer employment to an individual, you complete Form 8850 (PDF), Pre-Screening Notice and Certification Request for the Work Opportunity and Welfare-to-Work Credits, and send it to your state employment security agency no later than the 21st day after the individual begins work.
You must receive the certification before claiming the credit.
Refer to Tax Topic 750, Employer Tax Information, and Tax Info for Business, on this site for other employer information.
References: - Form 5884 (PDF), Work Opportunity Credit
- Form 8850 (PDF), Pre-Screening Notice and Certification Request for the Work Opportunity and Welfare-to-Work Credits
- Tax Topic 750, Employer Tax Information
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