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You May Qualify for Tax Credits to Help Pay for Higher Education
There are two different tax credits available
January 24, 2011
Did you know there are two different tax credits available that can offset some of the costs of higher education? They can be used for yourself or your dependents, but only one type of credit for each eligible student can be used each tax year.
These credits are the American Opportunity Credit and the Lifetime Learning Credit, and here’s how they work:
The American Opportunity Credit
- The credit can be up to $2,500 per eligible student.
- It is available for the first four years of post-secondary education.
- Forty percent of the credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes.
- The student must be pursuing an undergraduate degree or other recognized educational credential.
- The student must be enrolled at least half time for at least one academic period.
- Qualified expenses include tuition and fees, coursed-related books supplies and equipment.
- The full credit is generally available to eligible taxpayers who make less than $80,000 or $160,000 for married couples filing a joint return.
Lifetime Learning Credit
- The credit can be up to $2,000 per eligible student.
- It is available for all years of post-secondary education and for courses to acquire or improve job skills.
- The maximum credit is limited to the amount of tax you must pay on your return.
- The student does not need to be pursuing a degree or other recognized education credential.
- Qualified expenses include tuition and fees, course-related books, supplies and equipment.
- The full credit is generally available to eligible taxpayers who make less than $60,000 or $120,000 for married couples filing a joint return.
The credit can be claimed if you paid post secondary tuition and fees for yourself, your spouse or your dependent. And if you pay college expenses for two or more students in the same year, you can take different credits for each student. That means you can claim the American Opportunity Credit for one child and the Lifetime Learning Credit for another. You will want to decide which credit provides the greatest benefit each year.
Either the parent or the child can claim the credit on their tax return, but not both. And if the student was claimed as your dependent, they cannot file for the credit.
Please contact our tax professionals at 877.517.6872 if you have questions about this, or any other tax issues.
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