Helping clients navigate education tax credits can lead to significant savings, but the rules can be complex. Understanding the American opportunity tax credit (AOTC) and the lifetime learning credit (LLC) is essential for maximizing benefits while ensuring compliance. Proper planning can make a big difference in tax liability and financial aid eligibility.
Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand versions of these webinars (Part 1 and Part 2), you can access the full recording and the entire list of Q&As.
Q: Can a student claim themselves as a dependent even if the parents qualify to claim them as a dependent?
A: No. The student must demonstrate that they provided more than 50% of their own support in order to claim themselves.
Q: A student goes to college in Germany. To qualify for the education credit, is the school in Germany required to issue a 1098-T?
A: The college must be a recognized educational institution and have a federal ITIN. You can reference two eligible school lists on the IRS website: https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/eligible-educational-inst.
Q: If a student in a certified apprenticeship program is working in the field, can they use 529 plan funds for the apprenticeship program?
A: Yes. Qualified higher education expenses include fees, books, supplies and equipment required for a registered apprenticeship program certified with the Secretary of Labor [§529(c)(8)].
Q: Can a noncustodial parent claim the American opportunity tax credit (AOTC)?
A: No. Only the custodial parent can claim the AOTC, and only if they claim the child as a dependent on their tax return.
Q: Can a student who lives near the campus of a tech college, where they are a full-time student, use 529 funds for their apartment? If so, the cost of housing is not listed on the school’s website. How do you determine the cost of room and board?
A: Yes, 529 funds can be used for off-campus housing expenses, as long as they are within the school’s stated cost of attendance. The room and board costs cannot exceed the greater of:
- The allowance for room and board included in the cost of attendance, as determined by the eligible institution; or
- The actual invoice amount charged by the institution if the student lives in school-owned housing.
These costs apply even if the student lives off-campus. If the cost of attendance isn’t listed online, the student or family should contact the school directly for this information.
To learn more about helping clients plan for higher education, you can watch our on-demand webinars of Part 1 and Part 2. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial.
About National Association of Tax ProfessionalsThe National Association of Tax Professionals (NATP) is the largest association dedicated to equipping tax professionals with the resources, connections and education they need to provide the highest level of service to their clients. NATP is comprised of over 23,000 leading tax professionals who believe in a superior standard of ethics and exemplify professional excellence. Members rely on NATP to deliver professional connections, content expertise and advocacy that provides them with the support they need to best serve their clients. The organization welcomes all tax professionals in their quest to continually meet the needs of the public, no matter where they are in their careers.
The NATP headquarters is located in Appleton, WI. To learn more, visit www.natptax.com.
Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.