I am reporting 2014 tax by TaxAct software. One field is for education. My situation is I took a course for a certification in 2014. It was my first education course in US. I earned my Phd in a foreign country. When I filled one field
Years of postsecondary education completed before 2014?
I selected 4 or more. Is it wrong? Does it indicate in US only?
Can I get the education benefit on American opportunity credit?
See the image.
I would say you are ineligible for the American Opportunity credit, but are eligible for Lifetime Learning Credit. To be eligible for American Opportunity credit, the following need to be true (from IRS Pub 970):
"As of the beginning of 2014, the student had not completed the first 4 years of postsecondary education (generally, the freshman through senior years of college), as determined by the eligible educational institution"
and
"For at least one academic period beginning (or treated as beginning) in 2014, the student both:
Was enrolled in a program that leads to a degree, certificate, or other recognized educational credential; and
Carried at least one-half the normal full-time workload for his or her course of study."
The first one is unclear on the specifics of a foreign PhD, but the intent seems clear. The latter quote I feel like is where you would definitely run into trouble claiming the credit.
Since you've already completed your bachelor degree before 2014, you don't qualify for AOTC but you probably would qualify for the Lifetime Learning Credit The Lifetime Learning Tax Credit provides an education credit of up to $2,000 per family to help cover the cost of qualified higher education expenses, such as tuition and enrollment fees paid directly to the institution.
The Lifetime Learning Credit differs from the AOTC in that it's available to students for an unlimited number of years. The credit can be claimed by any student participating in a postsecondary degree program or taking courses for job skill attainment.
Single taxpayers can claim the credit if they have a modified adjusted gross income of $64,000 or less. Married couples (filing jointly) must have a modified adjusted gross income of $128,000 or less.
I was actually wondering the same thing, but it seems to such a rare tax situation that there is nothing I could find on the discussion boards to help clarify the matter.
After digging into the tax law and interpretations published in the Federal Tax Coordinator, I now feel more strongly that the American Opportunity Credit is available to someone in a similar situation as mine. According to the law, the credit is not allowed if you obtained your first 4 years of postsecondary education at an eligible school, but my school being a foreign college appears to be ineligible. See below for references to the IRC sections.
Per IRC Section 25A(b)(2)(C), "Credit allowed only for first 4 years of postsecondary education. The American Opportunity Tax 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 4 years of postsecondary education at an eligible educational institution."
The question now is what is an "eligible educational institution"? What if my postsecondary education was obtained at an ineligible institution?
Per IRC Section 25A(f)(2), The term “eligible educational institution” means an institution—
(A) which is described in section 481 of the Higher Education Act of 1965 (20U.S.C. 1088), as in effect on the date of the enactment of this section, and (B) which is eligible to participate in a program under title IV of such Act.
The Federal Tax Coordinator 2d provides some additional clarification as to the schools' eligibility guidelines. For me the key is that the school should be "eligible to participate in a program under title IV of such Act" The best and most definitive way to find out if you school is indeed eligible is to contact the school directly. The alternative, option is to look up your school name in the U.S. Federal Student Aid Code List (there is an option to look up Foreign Countries in the "State" field).
I do realize this thread may be outdated and might be better to post this in a new one, but it was one of the first ones in Google search, so here it is. I hope it helps someone in a similar situation. I will also be posting a more detailed analysis on my blog at www.verumllp.com
I agree with Alex regarding the interpretation of the Law. He is right. The fact you or your client has completed a degree in a foreign institution (which is not listed here: https://fafsa.ed.gov/FAFSA/app/schoolSearch) is not a disqualifying factor for the credit. Take into consideration that some colleges might not admit you or admit you conditional on those credentials. The foreign credentials are quite relative because they depend on equivalency, which is something that IRS can determine on eligible institutions only. Assuming the current curriculum is NOT a post-graduate program, as long as this is the first time you are doing a degree in an eligible institution and you did not complete any 4 years in an eligible institution before (regardless if you claimed the credit or not) then, you are good to go. I will say that AOC is OK and you can go with Alex's interpretation. In case something goes wrong, you can submit a 1040X switching to Lifetime Learning Credit and seek for the adjustment, if such is the case.
@B.Advance, you mention that:
Assuming the current curriculum is NOT a post-graduate program, as long as this is the first time you are doing a degree in an eligible institution and you did not complete any 4 years in an eligible institution before (regardless if you claimed the credit or not) then, you are good to go.
Why are you making a distinction on whether it is a post-graduate program or not and where are you basing that? Even if the current program is a post-graduate one, it would be the first post-secondary education at an eligible educational institution, so it should still satisfy the requirements in IRC Section 25A(b)(2)(C) that @Alex mentioned above.
My understanding of reading IRC Section 25A(b)(2)(C) is the same as Alex, that you should be eligible for the AOC, but I don't see the basis for B.Advance's limitation on post-graduate programs.
(I know this is an old thread, but this is essentially the most articulated answer on google, so adding some clarity will be nice and helpful for others that come across this)
