In this portion of our 2023 Tax Planning series, we walk through key Education Tax Benefits that come into play for 2023.
A Note from Us: At Akif CPA, we specialize in tax return preparation for individuals, families, and businesses. We are currently accepting new clients. Please contact us today if you require tax help.
Education Tax Benefits for 2023
We are highlighting three key areas of focus for education tax benefits in 2023—the American Opportunity Tax Credit, the Lifetime Learning Credit, and 529 Plans.
The American Opportunity Tax Credit Limits for 2023
For eligible students, a credit of up to $2,500 is available as part of the American Opportunity Tax Credit (AOTC). This credit covers qualified expenses a student incurs during the first four years of higher education with the goal of helping reduce the cost of attending colleges.
The AOTC is 100% for the firs $2,000 of qualified education expenses, and 25% of the next $2,000. Your modified adjust gross income must be $80,000 or less (or $160,000 or less if you are married and filing jointly).
*Note: You must have received a Form 1098-T, Tuition Statement from an eligible educational institution, and it’s important to be absolutely sure that you qualify before claiming it. Speak to a CPA if you are unsure, and to find out what other education-related tax savings are available to you.
The Lifetime Learning Credit
For eligible students, up to $2,000 is available annually for post-secondary school expenses under the Lifetime Learning Credit. This can be used for undergraduate, graduate, and professional degree courses (including job skills training), and there is no limit to the number of years that you can claim on the credit.
In order to qualify, you must:
- Pay qualified education expenses for higher education
- Be an eligible student at an eligible educational institution
- Be the student or the spouse of the student, or the student is a dependent you list on your tax return.
- Be enrolled and taking courses to get a degree, credential, or improve job skills
- Enroll for at least one academic period in the tax year.
- Your modified adjusted gross income is less than $80,000 ($160,000 if you are filing jointly)
- Receive a Form 1089-T, Tuition Statement from your school
*Note: It’s important to be sure you qualify for the credit before claiming it. Speak with a CPA if you are unsure, and to learn about other education-related tax breaks and credits.
529 Plan Contribution Limits and Elementary/Secondary Use Limits for 2023
529 plans are a great option for individuals looking to save for future education costs. 529 plan contribution limits are set by state, and for 2023 range from $235,000 to $550,000 per beneficiary. See the amounts below (in progressive alphabetical order)
| State | 2023 Contribution Limit |
| Alabama, Alaska | $475,000 |
| Arizona | $531,000 |
| Arkansas, Colorado, District of Columbia, Idaho, Illinois, Louisiana, Maryland, Massachusetts, Michigan, Nebraska, Nevada, New Mexico, Texas, Washington | $500,000 |
| California | $529,000 |
| Connecticut, Missouri, Vermont,Virginia, West Virginia | $550,000 |
| Delaware, South Dakota, Tennessee | $350,000 |
| Florida | $418,000 |
| Georgia, Mississippi | $235,000 |
| Hawaii, New Jersey | $305,000 |
| Indiana, Kansas, Kentucky, Oklahoma | $450,000 |
| Iowa | $420,000 |
| Maine, New York, Rhode Island | $520,000 |
| Minnesota | $425,000 |
| Montana | $396,000 |
| New Hampshire | $569,123 |
| North Carolina, Utah | $540,000 |
| North Dakota | $269,000 |
| Ohio | $523,000 |
| Oregon | $400,000 |
| Pennsylvania | $511,757 |
| South Carolina | $540,000 |
| Wisconsin | $545,000 |
| Wyoming | $501,000 |
For beneficiaries, 529 plans can be used to cover $10,000 of tuition per year for elementary and secondary schools (for public, private, and religious institutions).
*Note: Starting in 2024, funds in 529 plans can be rolled over into Roth IRAs in many scenarios for up to $35,000 in funds. If this interests or impacts you, please speak with a CPA.
Looking for 2023 Tax Bracket Info?
For information on 2023 Tax Brackets, and to see how 2024 Tax Brackets will compare, read: 2024 Tax Brackets vs. 2023 Tax Brackets.
Ready to Get Started on Your Taxes?
Get an early start on your taxes! Contact us today
