Education Tax Credits: And Other Educational Incentives

ETC CoverThe final Education Tax Credits book is now available. I published an abbreviated version in May that I titled Education Tax Credit Essentials. I wanted to make the most crucial content available for extended filing season and to encourage feedback as I worked on the full version. Education Tax Credits has almost everything in Essentials and adds information on several other educational incentives including savings plans. This text also provides more extensive references to the Internal Revenue Code and Treasury Regulations.

Education Tax Credits is a guide for tax professionals to better understand the many complexities related to education tax credits and other tax incentives for education. This systematic analysis guides preparers in the steps required to process education credit claims, from researching scholarships and calculating the maximum credit to coordinating with educational savings accounts and Pell grants.

Following an overview of education credits ETC then discusses treasury regulations, types of scholarships, scholarship treatments, and scholarship research. This book also discusses 1098T reporting rules, coordinating tax benefits, and tax planning. Aids assist in document preparation, student account tabulation, and credit calculation.

While the focus of the book is on the American Opportunity and Lifetime Learning tax credits it goes beyond the basics of the two tax credits and shows how re-characterizing some grants and scholarships can increase the amount of the credit. The orderly sections in Education Tax Credits help preparers cover every aspect of filing the claim, from preparing documentation and tabulating the expenses, to calculating the maximum credit. Not only does this simplify the process, but it can help insure that returns with education credits clearly comply with tax law and regulations. Other sections cover types of scholarships, scholarship research, 1098T reporting rules, coordinating tax benefits, and tax planning.

Illustrated aids assist in document preparation and student account tabulation with examples of records from two local institutions. The AOTC worksheet provided is an important tool since major tax software packages don't provide an automated process for claiming the credit where elective scholarships are considered. The AOTC worksheet is also available separately as a self-calculating PDF file.

There is a section on software solutions showing recommended steps for claiming the credit in Lacerte, TaxWise, and other tax packages. Various tax preparation techniques are also presented to simplify credit calculations based on individual circumstances. Coordination with other forms of educational assistance, amending returns to claim the credit for prior years, and coordinating tax returns for family members are other important topics included. Some special issues discussed include AGI considerations, AOTC phase-outs, changes in EITC, common errors, and a discussion of alternate treatments.

Additional sections now cover other educational considerations, such as educational savings (Section 529 and Coverdell), UTMA conversions, IRAs used for education, and employer assistance. There is also a section discussing financial aid and student loans. A final chapter takes a look at the future of tax credits and a 10-point guide to explaining the American Opportunity Tax Credit to clients is included as an appendix.

Since this text was written for professionals, taxpayers may not understand all of the concepts presented, but it should lead them to consider education tax credit benefits on their next tax return. Taxpayers are also encouraged to consider amending their returns if they missed out on the credit in past years. The book comes at a time when there are mixed signals from Washington about education credits. While the IRS and Treasury Department has been promoting the use of treasury regulations to increase the refund amount available with a claim, the Treasury Inspector General for Tax Administration (TIGTA) is saying there may be potentially billions in education credit fraud, and now restrictions have been added that could deprive some taxpayers of tax credits and deductions.

Education Tax Credits is available in print and digital formats. The print version is available from The eBook can be found at various eBook distributors including (Kindle edition) and (ePub). This is still a first edition so your feedback is welcome. Large portions of the book are available for previewing on several ebook sites, including

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