A lot of people aren’t aware that there are education tax credits available to help you offset the costs of paying for a college education for you or your dependents. So if you’re paying college costs, please keep reading as we’ll be talking about the American Opportunity Credit and the Lifetime Learning Credit, and how to take advantage of it.
Education Tax Credit Eligibility
There are eligibility requirements that you must meet for both of the tax credits. For either credit you must pay post-secondary tuition and fees for yourself, your significant other or your dependent to be eligible. The credit may be claimed by the parent or the student, but not by both, so don’t even try. If the student was claimed as a dependent by their parents, the student cannot file for the credit automatically.
For each student, you can choose to claim only one of the credits in a single tax year, but not both. For example, you cannot claim the American Opportunity Credit to pay for your child’s tuition charges and then claim the Lifetime Learning Credit for $2,000 more of their school costs. However, if you pay college costs for 2 or more students in the same tax year, you can choose to take both credits, one for each student, each year. So, if you had 2 sons, you could claim the American Opportunity Credit for one and the Lifetime Learning Credit for the other.
The American Opportunity Tax Credit
The American Opportunity Credit can be for up to $2,500 for an eligible student, and is available for the first 4 years of post-secondary education. Other guidelines for the tax credit, and stipulations you must meet – from the IRS:
- 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 Tax Credit
The Lifetime Learning Tax Credit can be for up to $2,000 for an eligible student, and is available for all years of post-secondary education – and for courses to acquire or improve job skills. Other guidelines for the tax credit, and stipulations you must meet – from the IRS:
- The maximum credited 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.
You cannot claim the tuition and fees tax deduction in the same year that you claim the American Opportunity Tax Credit or the Lifetime Learning Credit. You must choose to either take the credit or the deduction and should consider which is more beneficial for you.
For more information about these credits see IRS Publication 970.
Have you claimed either fo these tax credits for your education costs? How much were you able to claim?