Did you, your spouse or your dependent take higher education classes last year? If so, you may be able to claim the American Opportunity Credit or the Lifetime Learning Credit to help cover the costs. Here are some facts from the IRS about these important credits.

The American Opportunity Credit is:

• Worth up to $2,500 per eligible student.
• Only available for the first four years at an eligible college or vocational school.
• Subtracted from your taxes but can also give you a refund of up to $1,000 if it’s more than your taxes.
• For students earning a degree or other recognized credential.
• For students going to school at least half-time for at least one academic period that started during the tax year.
• For the cost of tuition, books and required fees and supplies.

The Lifetime Learning Credit is:

• Limited to $2,000 per tax return, per year, no matter how many students qualify.
• For all years of higher education, including classes for learning or improving job skills.
• Limited to the amount of your taxes.
• For the cost of tuition and required fees, plus books, supplies and equipment you must buy from the school.

For both credits:

• Your school should give you a Form 1098-T, Tuition Statement, showing expenses for the year. Make sure it’s correct.
• You must file Form 8863, Education Credits, to claim these credits on your tax return.
• You can’t claim either credit if someone else claims you as a dependent.
• You can’t claim both credits for the same student or for the same expense, in the same year.
• The credits are subject to income limits that could reduce the amount you can claim on your return.
• Visit IRS.gov and use the Interactive Tax Assistant tool to see if you’re eligible to claim these credits.

See Publication 970, Tax Benefits for Education for more on this topic. You can get it on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

• Tax Benefits for Education: Information Center
• Education Credits–AOTC and LLC
• American Opportunity Tax Credit
• Lifetime Learning Credit
• American Opportunity Tax Credit: Questions and Answers

WASHINGTON — The Internal Revenue Service today issued a notice providing answers to frequently asked questions (FAQs) on virtual currency, such as bitcoin. These FAQs provide basic information on the U.S. federal tax implications of transactions in, or transactions that use, virtual currency.

In some environments, virtual currency operates like “real” currency — i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance — but it does not have legal tender status in any jurisdiction.

The notice provides that virtual currency is treated as property for U.S. federal tax purposes.  General tax principles that apply to property transactions apply to transactions using virtual currency.  Among other things, this means that:

• Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
• Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply.  Normally, payers must issue Form 1099.
• The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
• A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.

Further details, including a set of 16 questions and answers, are in Notice 2014-21, posted today on IRS.gov.