Tasting Rooms Are About Building A Rapport With The Visitor Then Sales Will Follow

The old refrain in-effect says that people are all different and that is what keeps things interesting and makes the world go around. Or maybe said another way, differences in individual tastes is what makes the wine world go around. Competing wineries all produce wine from basically the same varietals, bearing in mind that there may be differences due to terroir, blending techniques, time in barrels and yeast used, just to name a few. In spite of all the idiosyncrasies in wine making, people do buy wine based upon an experience they had when being introduced to a wine. That is why people save corks, write tasting notes to themselves and relate stories about the wine to friends.

Winery owners I have talked with over the years have said that they try to keep a consistent profile of their various wines, from vintage to vintage, because their customers like specific wines. But, they still need to introduce new converts to their wines. Tastings, in a winery or at a tasting event, are an important means to expose new customers to wines, because people’s tastes do evolve; remember when you only liked White Zinfandel (and maybe still do)?

Tasting rooms are one of the few opportunities in business where the potential customer spends their own money to travel long distances to a winery, then pay (in most cases) to experience a winery and the wines, and joyfully expect to hear a sales pitch that ends with the sales person asking for the sale. I submit, in a tasting room, selling knowledge and stories creates an experience that can overcome some flaws and negative perceptions. “If you do build a great experience, customers tell each other about that. Word of mouth is very powerful,” says Jeff Bezos. In reality, aren’t wines a lot about experiences, a love of people in the moment, community, and romance?

In the October 2015 “Wines & Vines Newsletter” – Tasting Room Focus with Wise Bites, the author has a position that wineries should, in their tasting rooms, be selling their brand first and wine second. I would go one step further and say that the tasting room staffs are ambassadors and their “shtick” is telling about their winery and then wines.

Wines and Vines say, the public is interest in the people behind the brand first and the wine second; I buy into that thesis. Just look at all the reality shows and TV shows that feature the people doing interesting things. For example, Shark Tank, West Texas Investors Club, Robin Leach in the Rich and Famous, American Pickers, and home remodeling shows; these are all shows that feature the people and the other interesting people they encounter. A few years ago I wrote stories about “People of Wine Country”. These stories were well received, I believe, because I presented people who wanted to make great wine, their personal struggles, and some providing services to the makers of wine; never mentioned were the wineries, just the people. One such story was about a very young mother of 2 who lost her husband in a vineyard accident and struggled to make her husband’s dream reality.

Never losing sight of the fact, in the end, tasting rooms are really about selling the product. I would call the tasting room consultative selling-talking about the history of the product and its character (the way it is made and why). Therefore, let me present a few ideas relative to what makes a successful tasting room host/associate (and the same attributes can apply to most any industry):

· The person should have an open style that can draw people into a discussion. If it is a concierge style tasting room this is critical. Always asking for opinions from the guest. Listen more than talking.

· The associate needs to casually present their views/love of the wine culture and some fun facts about his/her experience in the industry. Even the young associate has a perspective that even the most senior can appreciate.

· Before the glasses are on the table or counter, the associate should explain the process the customer has paid for and why it is in place. For example, why the winery charges, why appointments only, etc.

· Tell an antidote about the owners of the winery and their beginnings and accomplishments. People want to be included in inside stories about the brand.

· Make people feel they are getting more than they paid for. This can be done with inexpensive give-a-ways such as imprinted coasters or a subscription to the winery’s “Insider Newsletter” or waiving the fees for the Wine Club with benefits.

· Once the tasting sample is poured, talk about the AVA of the grapes, the wine makers approach to that particular wine and the wines personally drank and his/her spouse. Do not tell people they will like something before they even taste. Obviously, if not married a significant friend will fill in the blank. Conversation will always deliver a trove of information to aid in the sales process.

· In a service industry, visitor accommodation is recognized and appreciated; it shows the winery appreciates a valued visitor.

· Nothing is ever gained from being critical of anything and goes for politics, religion or people.

· Having led sales teams in the service sector and technology sales, my tenet of successful selling was to make the exchange between customer and sales person as personal as appropriate. That experience can only be created by people with a heart toward service, open to building new acquaintances and displaying a real interest in getting the visitor to talk about themselves.

An old expression in the sales game is: Sell the sizzle and not the steak. In the wine business today with 2,000 tasting rooms in California alone, sell the winery and the visitors will come. Everybody can be an expert in wine because we all have different senses and know what we like and why we like it.

Most overlooked sales tool is training. In the sales game, training is always a must do, especially in the wine industry. I am personally familiar with a company in real estate sales that conducts sales meetings monthly and requires 100% attendance, but does allow make-up training. Certainly the wine industry is changing and staff needs to be prepared on how to handle customer/visitor comments and questions. I once ask a tasting room person how many cases of Merlot they produced and they did not know.

Here is a quick thought about training. Specifics of a wine– aromas, taste, tannins, and acid percentage are all relate to the final product. For the moment and to illustrate the point about training, let’s just focus on the subject of wine chemistry. For example, the importance of yeast selections, oak, aging, blending and the specific grape varietals; these are just a few things a good tasting room associate could be trained in to enhance visitor experience and perceptions. All translate into the ultimate sale of wine and follow-on purchases of a brand.

Consumers are getting more and more attuned to wines by brand. Wine consumption is continuing to show some growth, especially with Millennials. Wineries are changing their approach to the customer and on premise visitor as is witnessed by constructing well planned tasting rooms and concierge services. Just like the design of a grocery store, there is a science to selling wine. Wine sales is a customer centric business first and foremost.

VoIP and UC – What’s the Difference?

The world of enterprise communication has changed a lot over the last two decades and it’s no surprise that businesses want to upgrade to the latest technology. Anyone who has done research on modern enterprise communication systems is likely to have heard of VoIP and Unified Communication (UC). To a layperson, the terms may appear interchangeable or confusing but both solutions have important differences in terms of price, scope and complexity.

Price

Though this is not the biggest differentiator between VoIP and UC, it is often the one that matters most to organizations. VoIP is considerably cheaper to implement than UC, although a VoIP deployment can be the first step towards unified communication. Businesses that are looking to cut costs or those that already operate on razor thin margins are more likely to prefer VoIP since it offers considerable savings over traditional phone lines.

Implementing a comprehensive, end-to-end unified communication solution usually requires more investment – money, time and manpower – so it is a viable alternative for larger organizations or those that can afford to future proof their system for the long-term.

Scope

VoIP is quite simply Voice over Internet Protocol and generally, it does what it says. Businesses are able to route their voice communication over fast Internet connections instead of through circuit switches. UC has a much wider scope and includes video conferencing, speech recognition, presence, email, voicemail, messaging, fax as well as VoIP. In most cases, the voice part of unified communication is powered through VoIP.

However many hosted VoIP vendors also offer additional services such as video conferencing, voicemail to email transcription etc. as part of the basic VoIP service. This is often the source of confusion for businesses but the difference between these plans and UC is that the latter comprises many different apps that are developed/designed with similar interfaces. Each different application can communicate seamlessly with one another. To the end-user, the experience of using one tool is not different from using another – whether it is for messaging or voicemail.

Complexity

Unified communication solutions have many different components that have to work together to present a common interface for the end-user. It has more moving parts so to speak. VoIP is simpler to deploy and generates positive ROI within a short period of time. UC projects can span months or even years and it can take several iterations to eliminate bugs or personalize the deployment suit the needs of the organization.

How to Get Your Retirement Right

Seeing as I’m still shy of 30, my retirement-saving mentality hasn’t quite kicked in yet – even though I do contribute to my company 401(k) plan.

I’m still focused on purchasing a car to accommodate my two kids and building up their college funds.

But I usually spend my 70-mile commute to and from work chatting with relatives; often it’s with my grandparents.

One thing I have picked up from my conversations with them is that retirement planning has become more challenging.

Whether it’s constant changes to medical insurance or increased cost of living – thanks to higher taxes and food prices – something always seems to alter their financial burdens in retirement.

And after reading a few retirement surveys, it seems like most of us are not getting retirement right. But you can do something about it…

According to a recent survey conducted by Insured Retirement Institute and the Center for Generational Kinetics, more than a quarter of millennials, who are considered my generation, are relying on winning the lottery or being gifted money to survive in their retirement years.

This is not what I mean by doing something about it.

I have played the lotto a time or two, and if you are lucky enough to be gifted money from your parents or grandparents, that’s great. But those two items still may not last you through your retirement years.

That’s because retirement is not so much about the amount of money you start with, but more about how you can stretch those funds over more and more years.

To make that happen, it’s all about generating passive income throughout your retirement years – that’s how you can do something about it.

In fact, there are multiple strategies you can implement in your retirement days, and days leading up to retirement to grow your nest egg. Let me explain.

Take Control of Your Retirement

As you know, there are different types of retirement accounts. Many of you may be stuck in a 401(k) that is not yet fully vested – the level at which your employer match actually becomes your money.

But if you are entering or are in retirement, you might be able to roll your 401(k) into an IRA (individual retirement account) to have more control of your retirement funds – but speak with your accountant first to make sure you do it correctly.

For those of you who already hold IRAs or manage your own 401(k) through a self-directed brokerage account, then you already know what I’m talking about by opening up your world of investments with these portfolios.

However, there’s another strategy I don’t believe many have discovered that is available in IRAs and some self-directed 401(k)s – selling options.

I know, options are considered risky, but selling options is no riskier than owning stocks – in fact, it’s less risky, as long as you know what you are doing.

There are two types of options that you can sell: covered calls and cash-secured puts. Both of these are designed to collect stable and consistent income.

A covered call is when you already own a stock, preferably a dividend-paying, large-cap stock, and you sell a call with a strike price above where the stock is currently trading to collect what I consider an extra dividend.

Selling puts acts a bit differently. You sell puts on stocks you want to own. By agreeing to pay a certain price below where the stock is currently trading, you get paid a premium. The downside is that you may have to purchase the shares at the agreed upon price even if they fall well below that.

These two strategies combined can be used to build and sustain a retirement account throughout your golden years.

Income to Beat the Market

Even though you are not allowed to use margin in a government-ordained retirement portfolio, cash portfolios also generate consistent returns.

The average annual gain is a steady 8.5%, but that doesn’t do the strategy justice.

Selling options offers a steady flow of income that easily beats anything that you’re going to find with Treasurys, particularly considering that the Fed isn’t going to be lifting interest rates by a sizable amount for a very long time. What’s more, an average annual gain of 8.5% is looking more enticing right now than what stocks have offered in 2015, with the S&P 500 sitting at a loss for the year right now.

Paying Off And Consolidating Credit Card Debt – Your How To Guide

Credit Cards have become a necessity of life these days, but one should use it carefully because spending much more than your capability of paying it off. More expenditure would increase the chances of having to take out a Consolidated Debt Loan or accruing bad debt in general. A Consolidated Debt loan on your Credit Card can be a headache. It stays as a burden over your head until you pay it off in full.

There are many ways of paying off your bad debts, including credit cards. Many of them are mentioned here, which will prove to be helpful to those with bad debt and even to those who are expecting to get a new credit card.

– Start by setting up financial goals, which could help you in paying off your bad debt. Accumulating debt is easy, but paying off those debts often takes a lot of time. All those who are under the burden of credit card debt should first of all prepare a list of the debts by gathering all of their card statements, and arrange it in the order of the priority i.e. the one which is very expensive and which has high interest rate should be kept on top, and other thereafter.

– Once you have prepared your list and set up the goals, you should keep on reviewing your progress, so that it keeps you motivated. It will help you in striving hard to pay off your debts in short period of time.

– Take your credit card out of your wallet and keep it in a place where you don’t confront it again and again. This will aid in your resistance from using the card and accumulating more debt.

– What you could also do in paying off credit cards, is to keep a tab over your expenses. Try to go for only those which are really necessary for you, and don’t indulge yourself in unnecessary expenditure.

– Another good way to clear off your bad debts easily is to use your savings, it could prove to be a boon in such circumstances. Whereas, it is not recommended if you do not have much savings or some strategy through which you can again gather much savings in shorter time span. Go for your savings in such case only when the condition have started getting worse, because spending your savings for paying your debts could lead to financial insecurity for you in the future as savings can be used as emergency funds for the future.

– One can go for Debt Re-financing, also known as Debt Consolidating Loans i.e. another loan which is specifically available for paying the consolidated debts. You can opt for a Debt Refinance, which is available at low rates of interest.

– Balance Transfer of your current Credit Card to a new credit card with low rates could help you in getting rid of your loans with ease; however it becomes necessary to get all the information related to your new credit card. Be careful of any kind of hidden fees, cause if there is any, it would simply be a waste of efforts and money. Even though, Balance Transfer is really helpful, but could impact your credit.

– Paying your credit card debt by choosing the lowest available EMI (Equated Monthly Installments) won’t prove to be fruitful. This is because it would lead you to pay high amount of interest over time.

– Another good option is taking out equity of your house or other property to pay off your debts. Although one should check for the value of his house or property before going for it because property prices may be rising up and going down. Sometimes choosing equity for property could lead one to increase his debts; probably because the property they have mortgaged may value lower than their debt. This option is used because mortgage rates are lower than credit card rates. Be careful doing this though, and to be sure that you don’t accrue any more debt with this sort of debt reduction strategy.

Reduce Cost of College With Lifetime Learning Credits

Lifetime Learning Credit

For 2015, there are two tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. They are the American Opportunity Credit and the Lifetime Learning Credit.

TAX BENEFIT – For the tax year, you may be able to claim a Lifetime Learning Credit of up to $2,000 for qualified education expenses paid for all eligible students. There is no limit on the number of years the Lifetime Learning Credit can be claimed for each student. A tax credit reduces the amount of income tax you may have to pay. Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. The Lifetime Learning Credit is a nonrefundable credit, so if the credit is more than your tax the excess will not be refunded to you. Your allowable Lifetime Learning Credit is limited by the amount of your income and the amount of your tax.

ONLY ONE EDUCATION CREDIT ALLOWED – For each student, you can elect for any year only one of the credits. For example, if you elect to claim the Lifetime Learning Credit for a child on your 2015 tax return, you cannot, for that same child, also claim the American Opportunity Credit for 2015. If you are eligible to claim the Lifetime Learning Credit and you are also eligible to claim the American Opportunity Credit for the same student in the same year, you can choose to claim either credit, but not both. If you pay qualified education expenses for more than one student in the same year, you can choose to claim certain credits on a per-student, per-year basis. This means that, for example, you can claim the American Opportunity Credit for one student and the Lifetime Learning Credit for another student in the same year.

CLAIMING THE CREDIT – Generally, you can claim the Lifetime Learning Credit if all three of the following requirements are met.

  • You pay qualified education expenses of higher education.
  • You pay the education expenses for an eligible student (a student who is enrolled in one or more courses at an eligible educational institution).
  • The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return.

Table 3-1. Overview of the Lifetime Learning Credit for 2015

Maximum credit

Up to $2,000 credit per return

Limit on modified adjusted gross income (MAGI)

$128,000 if married filing jointly;

$64,000 if single, head of household, or qualifying widow(er)

Refundable or nonrefundable

Nonrefundable-credit limited to the amount of tax you must pay on your taxable income

Number of years of postsecondary education

Available for all years of postsecondary education and for courses to acquire or improve job skills

Number of tax years credit available

Available for an unlimited number of tax years

Type of program required

Student does not need to be pursuing a program leading to a degree or other recognized education credential

Number of courses

Available for one or more courses

Felony drug conviction

Felony drug convictions do not make the student ineligible

Qualified expenses

Tuition and fees required for enrollment or attendance (including amounts required to be paid to the institution for course-related books, supplies, and equipment)

Payments for academic periods

Payments made in 2015 for academic periods beginning in 2015 or beginning in the first 3 months of 2015

CANNOT CLAIM THE CREDIT – You cannot claim the Lifetime Learning Credit for 2015 if any of the following apply.

  • Your filing status is married filing separately.
  • You are listed as a dependent on another person’s tax return.
  • Your modified adjusted gross income (MAGI) is $64,000 or more ($128,000 or more in the case of a joint return).
  • You (or your spouse) were a nonresident alien for any part of 2015 and the nonresident alien did not elect to be treated as a resident alien for tax purposes. More information on nonresident aliens can be found in Publication 519.
  • You claim the American Opportunity Credit or a Tuition and Fees Deduction for the same student in same year.

QUALIFYING EXPENSES – The Lifetime Learning Credit is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Generally, the credit is allowed for qualified education expenses paid in same year for an academic period beginning in the same year or in the first 3 months of the following year. For example, if you paid $1,500 in December 2015 for qualified tuition for the spring 2016 semester beginning in January 2016, you may be able to use that $1,500 in figuring your 2015 credit.

Academic period. An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period.

Paid with borrowed funds. You can claim a Lifetime Learning Credit for qualified education expenses paid with the proceeds of a loan. You use the expenses to figure the Lifetime Learning Credit for the year in which the expenses are paid, not the year in which the loan is repaid. Treat loan disbursements sent directly to the educational institution as paid on the date the institution credits the student’s account.

Student withdraws from class (es). You can claim a Lifetime Learning Credit for qualified education expenses not refunded when a student withdraws.

For purposes of the Lifetime Learning Credit, qualified education expenses are tuition and certain related expenses required for enrollment in a course at an eligible educational institution. The course must be either part of a postsecondary degree program or taken by the student to acquire or improve job skills.

Eligible educational institution. An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education. It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. The educational institution should be able to tell you if it is an eligible educational institution. Certain educational institutions located outside the United States also participate in the U.S. Department of Education’s Federal Student Aid (FSA) programs (such as Oxford University).

Related expenses. Student activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution for enrollment or attendance.

NO DOUBLE-DIPPING – You cannot do any of the following.

  • Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim a Lifetime Learning Credit based on those same expenses.
  • Claim a Lifetime Learning Credit in the same year that you are claiming a tuition and fees deduction for the same student.
  • Claim a Lifetime Learning Credit and an American Opportunity Credit based on the same qualified education expenses.
  • Claim a Lifetime Learning Credit based on the same expenses used to figure the tax-free portion of a distribution from a Coverdell Education Savings Account (ESA) or Qualified Tuition Program (QTP).
  • Claim a credit based on qualified education expenses paid with tax-free educational assistance, such as a scholarship, grant, or assistance provided by an employer.

For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. The result is the amount of adjusted qualified education expenses for each student.

Tax-free educational assistance. For tax-free educational assistance received in 2015, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. Some tax-free educational assistance received after 2015 may be treated as a refund of qualified education expenses paid in 2015. This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2015 for qualified education expenses paid on behalf of a student in 2015 (or attributable to enrollment at an eligible educational institution during 2015).

Tax-free educational assistance includes:

  • The tax-free part of scholarships and fellowship grants
  • Pell grants (Scholarships, Fellowship Grants, Grants, and Tuition Reductions)
  • Employer-provided Educational Assistance
  • Veterans’ Educational Assistance
  • Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance.

Generally, any scholarship or fellowship grant is treated as tax free. However, a scholarship or fellowship grant is not treated as tax free to the extent the student includes it in gross income (if the student is required to file a tax return for the year the scholarship or fellowship grant is received) and either of the following is true.

  • The scholarship or fellowship grant (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses.
  • The scholarship or fellowship grant (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses.

You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the educational assistance in income in the year it is received.

Refunds. A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or require repayment (recapture) of a credit claimed in an earlier year. Some tax-free educational assistance received after 2015 may be treated as a refund.

Refunds received in 2015. For each student, figure the adjusted qualified education expenses for 2015 by adding all the qualified education expenses for 2015 and subtracting any refunds of those expenses received from the eligible educational institution during 2015.

Refunds received after 2015 but before your income tax return is filed. If anyone receives a refund after 2015 of qualified education expenses paid on behalf of a student in 2015 and the refund is paid before you file an income tax return for 2015, the amount of qualified education expenses for 2015 is reduced by the amount of the refund.

Refunds received after 2015 and after your income tax return is filed. If anyone receives a refund after 2015 of qualified education expenses paid on behalf of a student in 2015 and the refund is paid after you file an income tax return for 2015, you may need to repay some or all of the credit.

Credit recapture. If any tax-free educational assistance for the qualified education expenses paid in 2015 or any refund of your qualified education expenses paid in 2015 is received after you file your 2015 income tax return, you must recapture (repay) any excess credit. You do this by refiguring the amount of your adjusted qualified education expenses for 2015 by reducing the expenses by the amount of the refund or tax-free educational assistance. You then refigure your education credit(s) for 2015 and figure the amount by which your 2015 tax liability would have increased if you had claimed the refigured credit(s). Include that amount as an additional tax for the year the refund or tax-free assistance was received.

If you pay qualified education expenses in 2015 for an academic period that begins in the first 3 months of 2015 and you receive tax-free educational assistance, or a refund, as described above, you may choose to reduce your qualified education expenses for 2015 instead of reducing your expenses for 2015.

Amounts that do not reduce qualified education expenses. Do not reduce qualified education expenses by amounts paid with funds the student receives as:

  • Payment for services, such as wages,
  • A loan;
  • A gift;
  • An inheritance; or
  • A withdrawal from the student’s personal savings.

Do not reduce the qualified education expenses by any scholarship or fellowship grant reported as income on the student’s tax return in the following situations.

  • The use of the money is restricted, by the terms of the scholarship or fellowship grant, to costs of attendance (such as room and board) other than qualified education expenses, Scholarships, Fellowship Grants, Grants, and Tuition Reductions.
  • The use of the money is not restricted.

COORDINATION WITH PELL GRANTS AND OTHER SCHOLARSHIPS – You may be able to increase your Lifetime Learning Credit when the student (you, your spouse, or your dependent) includes certain scholarships or fellowship grants in the student’s gross income. Your credit may increase only if the amount of the student’s qualified education expenses minus the total amount of scholarships and fellowship grants is less than $10,000. If this situation applies, consider including some or all of the scholarship or fellowship grant in the student’s income in order to treat the included amount as paying nonqualified expenses instead of qualified education expenses. Nonqualified expenses are expenses such as room and board that are not qualified education expenses such as tuition and related fees.

Scholarships and fellowship grants that the student includes in income do not reduce the student’s qualified education expenses available to figure your Lifetime Learning Credit. Thus, including enough scholarship or fellowship grant in the student’s income to report up to $10,000 in qualified education expenses for your Lifetime Learning Credit may increase the credit by enough to increase your tax refund or reduce the amount of tax you owe even considering any increased tax liability from the additional income. However, the increase in tax liability as well as the loss of other tax credits may be greater than the additional Lifetime Learning Credit and may cause your tax refund to decrease or the amount of tax you owe to increase. Your specific circumstances will determine what amount, if any, of scholarship or fellowship grant to include in income to maximize your tax refund or minimize the amount of tax you owe. The scholarship or fellowship grant must be one that may (by its terms) be used for nonqualified expenses.

Finally, the amount of the scholarship or fellowship grant that is applied to nonqualified expenses cannot exceed the amount of the student’s actual nonqualified expenses that are paid in the tax year. This amount may differ from the student’s living expenses estimated by the student’s school in figuring the official cost of attendance under student aid rules. The fact that the educational institution applies the scholarship or fellowship grant to qualified education expenses, such as tuition and related fees, does not prevent the student from choosing to apply certain scholarships or fellowship grants to the student’s actual nonqualified expenses. By making this choice (that is, by including the part of the scholarship or fellowship grant applied to the student’s nonqualified expenses in income), the student may increase taxable income and may be required to file a tax return. But, this allows payments made in cash, by check, by credit or debit card, or with borrowed funds such as a student loan to be applied to qualified education expenses.

Something to consider is whether you will benefit from applying a scholarship or fellowship grant to nonqualified expenses will depend on the amount of the student’s qualified education expenses, the amount of the scholarship or fellowship grant, and whether the scholarship or fellowship grant may (by its terms) be used for nonqualified expenses. Any benefit will also depend on the student’s federal and state marginal tax rates as well as any federal and state tax credits the student claims. Before deciding, look at the total amount of your federal and state tax refunds or taxes owed and, if the student is your dependent, the student’s tax refunds or taxes owed. For example, if you are the student and you also claim the earned income credit, choosing to apply a scholarship or fellowship grant to nonqualified expenses by including the amount in your income may not benefit you if the decrease to your earned income credit as a result of including the scholarship or fellowship grant in income is more than the increase to your Lifetime Learning Credit as a result of including this amount in income.

NON-QUALIFYING EXPENSESQualified education expenses do not include amounts paid for:

  • Insurance;
  • Medical expenses (including student health fees);
  • Room and board;
  • Transportation; or
  • Similar personal, living, or family expenses.

This is true even if the amount must be paid to the institution as a condition of enrollment or attendance.

Sports, games, hobbies, and noncredit courses. Qualified education expenses generally do not include expenses that relate to any course of instruction or other education that involves sports, games or hobbies, or any noncredit course. However, if the course of instruction or other education is part of the student’s degree program or is taken by the student to acquire or improve job skills, these expenses can qualify.

Comprehensive or bundled fees. Some eligible educational institutions combine all of their fees for an academic period into one amount. If you do not receive or do not have access to an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed above, contact the institution. The institution is required to make this allocation and provide you with the amount you paid (or were billed) for qualified education expenses on Form 1098-T. To help you figure your Lifetime Learning Credit, the student should receive Form 1098-T. Generally, an eligible educational institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to each enrolled student by January 31, 2015. An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. However, the amounts on Form 1098-T, boxes 1 and 2, might be different from what you paid. When figuring the credit, use only the amounts you paid or are deemed to have paid in 2015 for qualified education expenses.

In addition, Form 1098-T should give other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements or refunds, and whether the student was enrolled at least half-time or was a graduate student. The eligible educational institution may ask for a completed Form W-9S, or similar statement to obtain the student’s name, address, and taxpayer identification number.

CLAIMING DEPENDENT’S EXPENSES – If there are qualified education expenses for your dependent during a tax year, either you or your dependent, but not both, can claim a Lifetime Learning Credit for your dependent’s expenses for that year. For you to claim a Lifetime Learning Credit for your dependent’s expenses, you must also claim an exemption for your dependent. You do this by listing your dependent’s name and other required information on Form 1040 (or Form 1040A), line 6c.

Expenses paid by dependent. If you claim an exemption on your tax return for an eligible student who is your dependent, treat any expenses paid (or deemed paid) by your dependent as if you had paid them. Include these expenses when figuring the amount of your Lifetime Learning Credit. Qualified education expenses paid directly to an eligible educational institution for your dependent under a court-approved divorce decree are treated as paid by your dependent.

Expenses paid by you. If you claim an exemption for a dependent who is an eligible student, only you can include any expenses you paid when figuring the amount of the Lifetime Learning Credit. If neither you nor anyone else claims an exemption for the dependent, only the dependent can include any expenses you paid when figuring the Lifetime Learning Credit.

Expenses paid by others. Someone other than you, your spouse, or your dependent (such as a relative or former spouse) may make a payment directly to an eligible educational institution to pay for an eligible student’s qualified education expenses. In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. If you claim an exemption on your tax return for the student, you are considered to have paid the expenses.

Tuition reduction. When an eligible educational institution provides a reduction in tuition to an employee of the institution (or spouse or dependent child of an employee), the amount of the reduction may or may not be taxable. If it is taxable, the employee is treated as receiving a payment of that amount and, in turn, paying it to the educational institution on behalf of the student.

FIGURING THE CREDIT – The amount of the Lifetime Learning Credit is 20% of the first $10,000 of qualified education expenses you paid for all eligible students. The maximum amount of Lifetime Learning Credit you can claim for 2015 is $2,000 (20% × $10,000). However, that amount may be reduced based on your MAGI.

The amount of your Lifetime Learning Credit is phased out (gradually reduced) if your MAGI is between $54,000 and $64,000 ($108,000 and $128,000 if you file a joint return). You cannot claim a Lifetime Learning Credit if your MAGI is $64,000 or more ($128,000 or more if you file a joint return).

Modified adjusted gross income (MAGI). For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return.

MAGI when using Form 1040A. If you file Form 1040A, your MAGI is the AGI on line 22 of that form.

MAGI when using Form 1040. If you file Form 1040, your MAGI is the AGI on line 38 of that form, modified by adding back any:

1. Foreign earned income exclusion,

2. Foreign housing exclusion,

3. Foreign housing deduction,

4. Exclusion of income by bona fide residents of American Samoa, and

5. Exclusion of income by bona fide residents of Puerto Rico.

Phase Out. If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using lines 10-18 of Form 8863.

You figure the tentative Lifetime Learning Credit (20% of the first $10,000 of qualified education expenses you paid for all eligible students). The result is a $1,320 (20% x $6,600 eligible expenses) tentative credit.

Because your MAGI is within the range of incomes where the credit must be reduced, you must multiply your tentative credit ($1,320) by a fraction. The numerator of the fraction is $128,000 (the upper limit for those filing a joint return) minus your MAGI. The denominator is $20,000, the range of incomes for the phase out ($108,000 to $128,000). The result is the amount of your phased out (reduced) Lifetime Learning Credit ($1,056).

$1,320 x ($128,000 – $112,000)/$20,000 = $1.056

Claiming the Credit You claim the Lifetime Learning Credit by completing Form 8863 and submitting it with your Form 1040 or 1040A. Enter the credit on Form 1040, line 50, or Form 1040A, line 33.