Understanding the Changes in Education Tax Credit for 2023: How to Take Advantage of the New Law
If you’re a parent or student, you’ll know that the cost of education can be pricey. That’s why it’s critical to stay informed when it comes to tax credits. Tax credits are a valuable way to reduce the amount of tax you owe, and for some, the Education Tax Credit could be just what you need.
In 2023, several educational tax credit changes will occur. In this article, we’ll discuss what these changes are and how you can make the most of them.
Understanding the Education Tax Credit
The Education Tax Credit is a tax benefit created for individuals who pay for qualified educational expenses for their children or themselves. The credit is worth up to $2,500 per student, per year. You can use it to reduce the amount of income tax you owe.
Before the law was updated, only the first four years of postsecondary education like college counted toward the credit. However, under the new law, the credit will be extended to the first five years of post-secondary education. This change will benefit those who are pursuing advanced degrees or who take longer to finish their undergraduate degree.
Income Thresholds Increased
Another significant change made to the Education Tax Credit is the expansion of income thresholds. Under the previously established law, the Education Tax Credit was only available to those who earn less than $80,000 per year if filing as a single person or $160,000 per year, filing jointly as a married couple. Under the new law, taxpayers who earn up to $90,000 as a single filer, and $180,000 as a married couple, can take advantage of the credit. If your income falls above these thresholds, there’s no need to worry because you might still be eligible for a portion of the credit.
Lifetime Learning Tax Credit
The Lifetime Learning Tax Credit is another education credit available under the new law. It allows taxpayers to claim up to $2,000 per tax return per year. The credit can be used for any qualified tuition and related expenses that you pay for yourself, your spouse, or a dependent.
Unlike the Education Tax Credit, there is no limit to the number of years for claiming the Lifetime Learning Tax Credit. It means, you can use it to pay for undergraduate, graduate, or professional degree courses.
Closing Thoughts
Education is an essential investment that can pay off in many ways, including tax benefits. Make sure you stay up-to-date with changes in the law so that you can take advantage of every opportunity to save on taxes.
With the changes in the Education Tax Credit for 2023, you can claim up to $2,500 in tax credits for qualified expenses. The expansion in income thresholds and the extension in the number of years of post-secondary education covered provide more flexibility and accessibility to the program.
Remember to speak to a tax professional to ensure you follow the correct procedure when claiming the credit. By making the most of the tax savings available, you can ease the burden of educational expenses and make the most of your investment in your future.
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