What You Need to Know About Education Credit Income Limits in 2022
Education is often considered the cornerstone of success for individuals of all ages. It is a powerful tool that allows individuals to learn and grow, unlocking limitless opportunities for personal and professional development. However, it’s no secret that the costs associated with education can often be staggering, making it difficult for individuals to pursue their dreams without breaking the bank.
Thankfully, there are several tax credits available to individuals who seek higher education. These education tax credits can help offset some of the expenses of pursuing a degree or certificate, making it more accessible to those looking to further their education. However, it’s important to keep in mind that there are specific income limits associated with each credit. Let’s take a closer look at these income limits and what you need to know about them in 2022.
The American Opportunity Tax Credit
The American Opportunity Tax Credit (AOTC) is a tax credit that was established to assist eligible students with the costs of higher education. It allows eligible individuals to receive up to $2,500 per year for each qualifying student in their household. To be eligible for this credit, the student must be pursuing a degree or certificate at an eligible educational institution.
One of the most significant factors surrounding the AOTC is the income limit. For the 2022 tax year, the credit begins to phase out for individuals with a modified adjusted gross income (MAGI) of $80,000 or more and for married couples filing jointly with a MAGI of $160,000 or more. The credit is completely phased out for individuals with a MAGI of $90,000 or more and couples who file jointly with a MAGI of $180,000 or more.
The Lifetime Learning Credit
The Lifetime Learning Credit (LLC) is another tax credit that allows eligible individuals to offset some of the costs associated with higher education. Unlike the AOTC, the LLC is not limited to students pursuing a degree or certificate and can be used by individuals taking one or more courses to further their education.
Similar to the AOTC, income limits also apply to the LLC. For the 2022 tax year, the maximum credit amount is $2,000 per tax return; however, the credit begins to phase out for individuals with a MAGI of $70,000 or more and for married couples filing jointly with a MAGI of $140,000 or more. The credit is completely phased out for individuals with a MAGI of $90,000 or more and couples who file jointly with a MAGI of $180,000 or more.
Conclusion
Higher education comes with a plethora of benefits, from personal fulfillment to career advancement. However, the costs associated with pursuing a degree or certificate are often steep. Thankfully, there are tax credits available to individuals seeking to further their education. It’s important, however, to keep in mind that these credits do come with specific income limits. Understanding these limits can help you determine which credits you’re eligible for and how to plan for your educational expenses accordingly. So, if you’re looking to further your education in 2022, make sure you understand the education credit income limits and how they may impact your financial situation.
