The Internal Revenue Service has proposed revisions to tuition tax credits and deductions for individual tax payers.  The changes are meant to be in alignment with the Protecting Americans from Tax Hikes (PATH).

Key things to know:

• No deduction or credit will be allowed unless there is a 1098-T, Tuition Statement, received from the eligible educational institution.
• An exception will be made for items not included on the form (e.g. required course materials that qualify for the American Opportunity Tax Credit)
• Form 0198-T should be received by January 31 of the following year
• Reporting will be more specific for qualified tuition and related expenses paid in one year that relate to the academic period beginning in the first three months of the next calendar year.  The prepaid amount would be explicitly stated
• Reporting will also indicate the number of months a student was considered full time.
• Institutions will only report the amounts actually paid (rather than billed)
• The tax identification number of the eligible educational institution and the student will be required to claim any tax credits.

Who can claim an education tax credits?

You must meet all of the following criteria

• You, your dependent or a third party pays qualified educational expenses for higher education.
• An eligible student must be enrolled at an eligible educational institution.
• The eligible student is yourself, your spouse or a dependent you list on your tax return.

You cannot claim a credit when:

• Someone else, such as your parents, list you as a dependent on their tax return
• Your filing status is married filing separately
• You already claimed or deducted another higher education benefit using the same student or same expenses
• You (or your spouse) were a non-resident alien for any part of the year and did not choose to be treated as a resident alien for tax purposes

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