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hope/lifetime learning credit

coconut lime

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    i tried to do an SDN search on these tax credits but i'm still confused about them. from what i understand, i am eligible for these as a full time medical student? i am still considered a dependent under my parents though, so does that mean that they are eligible? they pay for part of my tuition and i have govt. loans for the rest.

    also, are these tax credits something new? i don't recally hearing about them before. my school just sent an email to everyone about this and this is the first i've ever heard of it.

    does anyone have more information? thanks!
     

    mpp

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      You may be eligible for the Lifetime Learning Credit. The Hope Credit is only for those in their first two years of undergraduate education.

      If you are a dependent that you cannot claim the Lifetime Learning Credit but your parents can. The credit is a fraction of 20% of the first $10,000 spent on education expenses (tuition, books, etc.). The fraction is based on your parent's adjusted gross income. If they make more than $105,000 then they will get no credit. If it is between $85,000 and $105,000 then they will get a fraction of that 20%. If it is below $85,000 then they can take the maximum credit ($2000 - provided you plus any other dependents that they paid educational expenses for paid more than $10,000 in educational expenses last year).

      Check IRS Publication 970 for more information.
       

      BigPimpin

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        Hey, I read that IRS document....let me see if I got this right.

        So, if I'm a medical student at a US medical school, and (like most medical students) I used loans of various kinds to pay my tuition and such since I have no job and no income, and I fulfill all of the other requirements, I can claim the Lifetime Learning Credit?

        If so, SWEET. Is there a grid or something to determine how much you receive? I'm sure we're only talking about a hundred bucks or something at the most, but anything helps.

        Thanks to the previous posters for bringing this up and responding.

        BP
         
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          I think you or your parents can only claim the lifetime learning credit if you pay tuition expenses YOURSELF--not with loan or other financial aid money. If you pay these expenses out of pocket (or your parents do) then you can deduct up to $2000 of it, depending on our (or their) income.
           

          off2skl

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            Mistress S said:
            I think you or your parents can only claim the lifetime learning credit if you pay tuition expenses YOURSELF--not with loan or other financial aid money. If you pay these expenses out of pocket (or your parents do) then you can deduct up to $2000 of it, depending on our (or their) income.

            Regardless of whether you are taking out a loan or not you are PAYING for your tuition, so therefore you are able to take the credit (we did last year under the advice of an accountant). If your tuition ws paid by scholarship or grants, then I would think that you would be unable to take the credit.

            However, for the poster who had no job, etc; if you have not paid any income tax this year then you would not be able to take the credit. The credit is off of taxes you would have otherwise paid. If you haven't paid taxes then there is nothing to refund to you.
             

            BigPimpin

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              Hmm, interesting. While I had no job this past year, I am reporting income. I probably sold about $300 of items online, and oddly enough this makes me eligible for something like $40 of the Earned Income Credit. I doubt it does, but is there any chance that this also qualifies me for the Lifetime Learning Credit?

              Thanks for the knowledge, folks.

              BP
               

              Mistress S

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                off2skl said:
                Regardless of whether you are taking out a loan or not you are PAYING for your tuition, so therefore you are able to take the credit (we did last year under the advice of an accountant). If your tuition ws paid by scholarship or grants, then I would think that you would be unable to take the credit.

                However, for the poster who had no job, etc; if you have not paid any income tax this year then you would not be able to take the credit. The credit is off of taxes you would have otherwise paid. If you haven't paid taxes then there is nothing to refund to you.

                No, if you paid for your education with financial aid money (such as stafford loans, primarily what you will be taking out as a med student), then the government paid for it--not you (although eventually you will be expected to pay it back, with interest, and at that point you can deduct the interest you pay on your student loans from your taxes, but not the principal). I have had more than one tax consultant tell me you cannot use the lifetime learning or hope tax credits if you paid for your education with financial aid, whether grants, scholarships, or loan funds were used. If some portion of your education was covered by financial aid and you paid some portion yourself, you can only use the credit for the amount you (or your parents) paid out of pocket. You should receive a form 1099 from schools you attended, it will show an amount billed for tuition and an amount you paid--you can only use the LLC or hope credits for the amount you paid, not the amount billed. Believe me, I wish it were otherwise--I'm getting exactly dick on my refund this year, and being able to claim this would help me out. But this is what I've been told, this year by Jackson Hewitt, and it makes sense--you haven't "paid" for your education with loan money until you pay those loans back, so you can't claim a tax credit for money you plan to spend in the future but didn'y actually spend that tax year.
                 

                BigPimpin

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                  Doesn't it actually say in that IRS document ref'd above that even if you used loans to pay for your education, you can still claim the credit?

                  Maybe I'm just wanting this to happen too much, and I'm deluding myself. It's possible.

                  BP
                   

                  Skaterbabe74

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                    I've always claimed either the education deduction or the lifetime learning credit and up until this year haven't paid anything out of pocket (other than books) for my education. The 1098 my school sends includes scholarships and grants, not loans. If you subtract the total amount of qualified tuition/expenses from the amt of scholarships and grants, you can claim the remainder as an education deduction (which is up to 4K) or the Lifetime Learning Credit (which is up to 2K). And I've had accountants do my taxes and done them myself over the years.

                    Good luck
                     

                    Mistress S

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                      I'll call my tax preparer today to check again--I hope you guys are right. I'm kind of pissed that I've been told I can't claim this if I can, I never have before and really could use the money.
                       

                      BigPimpin

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                        For the LLC, is it qualified expenses minus grants/scholarships, or grants/scholarships minus qualified expenses? If the latter, too bad for me, since I have no scholarships or grants, and ya can't subtract from zero in this case.

                        At any rate, thanks for this topic and the responses, this is all a big help in my quest to put something, anything, in my bank account.

                        BP
                         

                        mpp

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                          Let me see if I can clear this up (although if you don't understand then you should probably read Pub 970 above as it is quite clearly stated in that publication).

                          You can take the lifetime learning credit if you paid for tuition either with your money or borrowed money. Whatever you paid out of your pocket (either your money or borrowed) is eligible for the credit. You cannot take any credit if you paid all your tuition with tax-free grants or scholarsips. If you paid some of your tuition with grants and scholarship but paid for some out-of-pocket, then you can claim the credit for the portion you paid out-of-pocket.

                          This is a tax credit. Therefore you must have paid income tax to take this credit. If you had no job last year (or no earned income), then you cannot take this credit. You cannot take more credit than income tax you have paid, so if you only paid $500 in income tax last year then you cannot claim a credit more than $500.
                           

                          InfraMan

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                            Mistress S said:
                            I'll call my tax preparer today to check again--I hope you guys are right. I'm kind of pissed that I've been told I can't claim this if I can, I never have before and really could use the money.

                            Not flaming, but this is specifically why you should do your own taxes. You can never trust someone else to care as much about your money as you do.

                            And if it turns out you *can* claim the credit, you should consider filing amended returns for previous tax years.
                             

                            Mistress S

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                              I agree completely--I have always done my taxes myself, this is the first year I had it done by someone else and I would absolutely not reccommend it. I thought it was their job to try to get you the best refund possible, what else did I pay them $90 for? Instead, I call today and find out yes, I can claim the LLC, and then they even tried to say I would have to pay to come in and file an amendment! They acted like they were doing me a favor by waving the fee, when my feeling is they screwed up the first time by not telling me I could claim it and owe me an apology. Whatever.
                               

                              UCPharm

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                                Mistress S said:
                                I agree completely--I have always done my taxes myself, this is the first year I had it done by someone else and I would absolutely not reccommend it. I thought it was their job to try to get you the best refund possible, what else did I pay them $90 for? Instead, I call today and find out yes, I can claim the LLC, and then they even tried to say I would have to pay to come in and file an amendment! They acted like they were doing me a favor by waving the fee, when my feeling is they screwed up the first time by not telling me I could claim it and owe me an apology. Whatever.

                                Wow...
                                 

                                n_a_t

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                                  Mistress S said:
                                  Instead, I call today and find out yes, I can claim the LLC, and then they even tried to say I would have to pay to come in and file an amendment!

                                  my 2 cents: you can also file amendments for the past 3 years you did your taxes too. so that would be for 2001, 2002, and 2003. the amended returns have to be received by irs BEFORE april 15th. i just had to go through this $hit last year. it's such a pain trying to squeeze back any of your own money out of irs, but if you wait, you'll get it.
                                   

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                                    For those who encouraged me to file an amendment for past tax years--any idea how to go about doing this? What forms would I need, and should I go see an accountant or is this something I can do on my own? Additionally, I have also realized from investigating on my own that I was probably eligible for the earned income credit for at least the past 3 years, and I never claimed it. It might be worthwhile to pay someone to help me file all those amendments, as I imagine it could be complicated, but I'm a little reluctant to do so after my recent experience. Any advice on who a reputable person or group might be to assist with this, or how I could go about doing it on my own, would be appreciated.
                                     

                                    mpp

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                                      You would file an amended tax return form (Form 1040X). You should be able to do it yourself but you can always got to a Tax Office like H&R Block (although they may charge you quite a bit to do amended returns).

                                      There are income and age requirements for eligibility for the earned income tax credit. Check Publication 596 to see if you qualify.
                                       
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