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$2,500 Educational Tax Credit [2021] American Opportunity Tax Credit vs. Life Learning Credit $2,000 - YouTube
Channel: JJ THE CPA
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jj the cpa here hope you're doing well
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let's talk about
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educational tax credits now the first
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thing i want you to note is that what
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did not continue into 21 is the ability
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to take a tax deduction on the
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individual tax return for educational
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expenses but the tax credits are
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typically way better than a tax
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deduction because the tax credit will
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reduce down your tax
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dollar for dollar and one of these tax
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credits is partially refundable the two
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tax credits are the american opportunity
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tax credit as well as the lifetime
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learning credit
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both are gonna in essence give you a tax
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credit for those things you would think
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of that are a part of
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going to college so tuition and the fees
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lab fees books
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computers and things that would be
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required for you to go to class this is
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not going to include room or board now
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the american opportunity tax credit is
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up to twenty five hundred dollars while
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the lifetime learning credit is up to
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two thousand so if you're in a position
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where you qualify for both if you will
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you can only take one or the other but
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you would wanna take the american
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opportunity tax credit because you get a
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higher amount now striking differences
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between the two
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is this with the american opportunity
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tax credit you have to be in the pursuit
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of a degree
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and you have to be more than
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a or you have to be more than part-time
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student for the lifetime learning credit
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you don't have to be in pursuit of a
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degree and you don't have to be a
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full-time student you can be
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taking just a class
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now the way the credits are calculated
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are also different so with the american
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opportunity tax credit and by the way
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i'm going to give you a link
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uh to the irs website not only to the
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information related to this but the
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forms in which it's calculated i'm also
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going to tell you where you can look on
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your tax return to see if in fact you
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got this whether you prepare yourself or
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you have someone prepared for you what's
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key is well did it get in there and
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where would you look but the american
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opportunity tax credit so this tax
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credit is that you get a hundred percent
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tax credit on the first two thousand
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dollars spent for these qualified
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educational expenses that means you
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spend two grand you got a two thousand
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dollar tax credit
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then for the next two 000 that is spent
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you get 25 of that
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as a tax credit in essence how you get
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to the 2500 now the lifetime learning
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credit you get a 20
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tax credit on your qualified educational
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expenses that i told you
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up to ten thousand dollars of
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educational expenses so if you had ten
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thousand or more then you would get the
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full two thousand dollar tax credit now
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when you are looking at this on your tax
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return you would look to form 88 63 i'm
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a practicing cpa but there are so many
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different forms and line items and they
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change each year you're right i'm
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looking at my notes but i'm going to
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give you a link to this and so if you
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want to ensure that you got it you can
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go through the forms that are going to
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be filed with the irs and if you find
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form 8863 that's your first hint that
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most likely your return is going to
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include this now for the lifetime
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learning credit it is not a refundable
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credit
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the the american opportunity tax credit
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up to a thousand dollars of it
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is refundable
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so it's not all refundable but
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refundable now how does that really come
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into play
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well if you had no taxes meaning you
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didn't have any income but you did have
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these expenses and you did have this
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credit but you have no taxes
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well the lifetime learning credit's not
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going to help you because that credit
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just offsets taxes that you have
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the american opportunity tax credit
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not only offsets taxes but then up to a
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thousand dollars of it is actually
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refundable meaning if you didn't have
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any income
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but you did have these expenses and you
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were in your first four years
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then you would be able to still file a
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return claim the credit and get a
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thousand dollar refund even though you
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didn't have any income or taxes so it's
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something you definitely want to take a
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look at when it comes to that
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but
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you will look not only on that form 8863
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but you're looking on line eight of that
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form to see the amount of the credit
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that's gonna flow to what's called a
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schedule three and when you look at
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schedule three you're gonna then see
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that credit carried from form 88 63 and
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then when you're looking at
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the schedule fee you'll see it on line 3
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of schedule c
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schedule 3.
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but then if you want to even just go all
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the way to the end and you want to go
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well i don't want to look for that form
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where do i see it on my form 1040.
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so on form 1040 the non-refundable
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portion so this would be where the
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lifetime learning credit is shown
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and or the american opportunity tax
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credit up to the amount that would be uh
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non-refundable the fifteen hundred
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dollars uh that is going to be
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uh on line twenty uh in terms of finding
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that credit on form 1040 line 20. the
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refundable amount of the american
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opportunity tax credit you would find on
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line 29 of form 1040. now these are all
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2020 forms line items change year to
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year
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so if you're looking at your 2020 you
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happen to be listening to this next year
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and you're looking at your 2022 all the
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forms should be the same might just be
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minorly a different line item but you'll
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be able to see that you in fact got this
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so if you're in college you need to take
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advantage of this the person that gets
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to claim it is whoever is claiming that
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person so if you're not a dependent of
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somebody else then you claim this
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yourself however
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if you are or can be claimed as a
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dependent then the person that can or
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could claim you
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is the one that would have to claim this
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credit so for some it gets phased out if
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the income's too high the big thing you
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want to know is include this with the
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documents you're given to your tax pro
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include this information when you're
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preparing your tax return because you
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may qualify or partially qualify for it
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you don't have to worry about what the
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income limitations are because the forms
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will take care of it your software will
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take care of it but again if you want
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more information on this i've put links
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in the body of this video to the faqs
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related to this as well as these forms
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that i've indicated to you all right hey
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thanks for tuning in i'd love it if
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you'd subscribe and then don't you ever
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forget you've never met a cpa quite like
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me have a great one
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