How do I calculate my Education Credit?
How do I calculate my Education Credit?
Who Can Claim an Education Credit
You may be able to claim an education credit if you, your spouse, or a dependent you claim on your tax return was a student enrolled at or attending an eligible educational institution. For 2020, the credits are based on the amount of adjusted qualified education expenses paid for the student in 2021 for academic periods beginning in 2021 or beginning in the first 3 months of 2022. Academic period. An academic period is any quarter, semester, trimester, or any other period of study, as reasonably determined by an eligible educational institution. If an eligible educational institution uses credit hours or clock hours and doesn't have academic terms, each payment period may be treated as an academic period. For details, see Academic period in chapters 2 and 3 of Pub. 970, Tax Benefits for Education. Who can claim a dependent's expenses. If a student is claimed as a dependent on another person's tax return, all qualified education expenses of the student are treated as having been paid by that person. Therefore, only that person can claim an education credit for the student. If a student isn't claimed as a dependent on another person's tax return, only the student can claim the credit. Expenses paid by a third party. Qualified education expenses paid on behalf of the student by someone other than the student (such as a relative) are treated as paid by the student. However, qualified education expenses paid (or treated as paid) by a student who is claimed as a dependent on your tax return are treated as paid by you. Therefore, you're treated as having paid expenses that were paid by the third party. For more information and an example, see Who Can Claim a Dependent's Expenses in Pub. 970, chapters 2 and 3.
Form 1098-T requirement.
To be eligible to claim the American opportunity credit or the lifetime learning credit, the law requires a taxpayer (or a dependent) to have received Form 1098-T, Tuition Statement, from an eligible educational institution, whether domestic or foreign. However, you may claim one of these education benefits if the student doesn't receive a Form 1098-T because the student’s educational institution isn't required to furnish a Form 1098-T to the student under existing rules (for example, if the student is a qualified nonresident alien, has certain qualified education expenses paid entirely with scholarships, has certain qualified education expenses paid under a formal billing arrangement, or is enrolled only in courses for which no academic credit is awarded). If a student’s educational institution isn't required to provide a Form 1098-T to the student, you may claim one of these education benefits without a Form 1098-T if you otherwise qualify, can demonstrate that you (or a dependent) were enrolled at an eligible educational institution, and can substantiate the payment of qualified tuition and related expenses. You may also claim one of these educational benefits if the student attended an eligible educational institution required to furnish Form 1098-T but the student doesn't receive Form 1098-T before you file your tax return (for example, if the institution is otherwise required to furnish the Form 1098-T and doesn't furnish it or refuses to do so) and you take the following required steps: After February 1, 2022, but before the due date for your 2021 tax return, you or the student must request that the educational institution furnish a Form 1098-T. You must fully cooperate with the educational institution's efforts to gather the information needed to furnish the Form 1098-T. You must also otherwise qualify for the benefit, be able to demonstrate that you (or a dependent) were enrolled at an eligible educational institution, and substantiate the payment of qualified tuition and related expenses. The amount of qualified tuition and related expenses reported on Form 1098-T may not reflect the total amount of the qualified tuition and related expenses paid during the year for which you may claim an education tax credit. You may include qualified tuition and related expenses that are not reported on Form 1098-T when claiming one of the related credits if you can substantiate payment of these expenses. You may not include expenses paid on the form 1098-T that have been paid by qualified scholarships, including those that were not processed by the universities.
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