The purchase of a desktop computer may qualify as an expense for the American Opportunity Tax Credit (AOTC) if the computer was bought specifically for school and its primary use is educational.
However, a desktop is not deductible for the Lifetime Learning Credit (LLC), as the LLC only allows deductions for expenses paid directly to the educational institution.
American Opportunity Tax Credit (AOTC)
- Maximum Benefit: Up to $2,500 per eligible student.
- Availability: Limited to the first four years of higher education.
- Refundability: Partially refundable; 40% (up to $1,000) is refundable even if there is no tax liability.
- Enrollment Requirements:
- Must be enrolled in a degree or credential-seeking program.
- Must be enrolled at least half-time.
- Exclusion: Cannot have a felony drug conviction.
- Income Limits (MAGI):
- Full Credit: $80,000 or less ($160,000 or less for married filing jointly).
- Reduced Credit: Over $80,000 but less than $90,000 (Over $160,000 but less than $180,000 for married filing jointly).
- No Credit: Over $90,000 ($180,000 for joint filers).
- Dependent Status: Cannot be claimed as a dependent on someone else's return (if you are, the person claiming you may be able to claim the credit).
Lifetime Learning Credit (LLC)
- Maximum Benefit: Up to $2,000 (20% of the first $10,000 in expenses).
- Availability: Can be claimed for an unlimited number of years.
- Refundability: Non-refundable; it can reduce tax owed to $0, but any remaining credit is lost.
- Deductible Expenses: Only expenses paid directly to the school.
- Enrollment Requirements:
- Must be enrolled for at least one academic period (semester, quarter, etc.) beginning in the tax year.
- Must be enrolled or taking courses at an eligible educational institution.
- Courses must be for a degree, recognized educational credential, or to acquire/improve job skills.
- Filing Status Exclusion: Cannot be claimed if Married Filing Separately.
- Income Limits (MAGI):
- Full Credit: $80,000 or less ($160,000 or less for married filing jointly).
- Reduced Credit: Over $80,000 but less than $90,000 (Over $160,000 but less than $180,000 for married filing jointly).
- No Credit: Over $90,000 ($180,000 for joint filers).
- Dependent Status: Cannot be claimed as a dependent on someone else's return (if you are the person claiming, you may be able to claim the credit).
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