Was there something in the Path Law, which not only made the AOC permanent but restricted it's use to the first four years of higher education rather than any 4 years? I ask, because if I understood the NCPE speaker, AOC is only available in the first 4 years.
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Nope, I am almost positive nothing was changed in that regard.
It suspect that "first four years" may have just been easier to say than explain the entire details about "has not completed four years". As long as the school views the student as an undergraduate, that year would qualify as one of the four years, regardless of how many calendar years the student has gone to college. -
§25A contains the following though I think the interpretation of the literal language is what TGB said in his first sentence.Originally posted by TaxGuyBill View Post
(i) American opportunity tax credit
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(2) Credit allowed for first 4 years of post-secondary education
Subparagraphs (A) and (C) of subsection (b)(2) shall be applied by substituting "4" for "2".Comment
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Title i - extenders
PART 1 – Tax Relief for Families and Individuals
Section 102. Enhanced American opportunity tax credit made permanent. The Hope
Scholarship Credit is a credit of $1,800 (indexed for inflation) for various tuition and related
expenses for the first two years of post-secondary education. It phases out for AGI starting at
$48,000 (if single) and $96,000 (if married filing jointly) – these amounts are also indexed for
inflation. The American Opportunity Tax Credit (AOTC) takes those permanent provisions of
the Hope Scholarship Credit and increases the credit to $2,500 for four years of post-secondary
education, and increases the beginning of the phase-out amounts to $80,000 (single) and
$160,000 (married filing jointly) for 2009 to 2017. The provision makes the AOTC permanent.
MikeComment
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I believe they are referring to academic years, freshmen, sophomore, etc. rather than calendar year when term first 4 years is used.Comment
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The credit is available by tax year, which would be calendar year in this context. You can't receive the credit if you've already received it in four prior tax years (calendar years). I think the question is, must you use each of the first four years of school for the credit, or can you choose to skip a year and get the credit for, say, years 1, 2, 3, and 5.Originally posted by kathyc2 View Post
Example: typical student on "five year plan" beginning 2015, suppose they attend school from Sep thru May every academic year, but they change their major during junior year, so they don't finish degree requirements in normal four years.
TaxYr
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2015 qualified student (begins freshman year in Sep)
2016 qualified student (begins sophomore year in Sep)
2017 qualified student (begins junior year in Sep)
2018 qualified student (begins senior year in Sep)
2019 ??? (ends senior year in May, begins fifth year in Sep)
2020 not qualified (ends fifth year in May)
I think the question is, can you use 2019 and any of the three preceding years for the credit (thereby skipping a year), or must you use 2015-2018 for the credit and then you're done? I'd say 2019 is not one of the "first four years", but what did they really intend?
It's not really clear from the pub either, so I don't know, maybe it would take a court case to resolve?Last edited by Rapid Robert; 11-06-2016, 01:53 PM."You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
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The code says (C) Credit allowed only for first 2 years of postsecondary education
The Hope Scholarship Credit under subsection (a)(1) shall not be allowed for a taxable year with respect to the qualified tuition and related expenses of an eligible student if the student has completed (before the beginning of such taxable year) the first 2 years of postsecondary education at an eligible educational institution.
which does not limit which calendar years.
This is modified later in the code for AOC (2) Credit allowed for first 4 years of post-secondary education
Subparagraphs (A) and (C) of subsection (b)(2) shall be applied by substituting “4” for “2”.
If a student attends college 2010/2011 & 2011/2012. That's two years.
Then they could return to college 2014/2015 & 2015/2016. That's two more years.
We have had several clients that skip a year, which I'm convinced is allowed - however we have never had an audit around that issue.
MikeComment
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Yes, you can skip a year.Originally posted by Rapid Robert View Post
The Code says that "first 2 years of postsecondary education" means "has completed (before the beginning of such taxable year) the first 2 years of postsecondary education".
The Regulation then clarify that "has not completed the first two years of postsecondary education" means "whether the institution ... awards the student two years of academic credit at that institution for postsecondary course work completed by the student prior to the beginning of the taxable year".
Example #2 in both the Regulation (based on the Hope Credit for 2 years) and Publication give an example that shows it is based on what the college considers the student, not the number of calendar years.
The Example #2 in the Regulation (based on the Hope Credit for 2 years) is most clear:
Example 2.
Prior to 1998, Student B attended college for several years on a full-time basis. Student B transfers to College V for the 1998 Spring semester. College V awards Student B credit for some (but not all) of the courses he previously completed, and College V classifies Student B as a first-semester sophomore. During both the Spring and Fall semesters of 1998, Student B is enrolled in at least one-half the normal full-time work load for his degree program at College V. Because College V does not classify Student B as having completed the first two years of postsecondary education as of the beginning of 1998, Student B is an eligible student for taxable year 1998.
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Thanks
thanks everyone.Comment
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