Minimize Higher Education Expenses with These Tax Credits

As parents and students prepare to bear the expenses for higher education, they may bring down their education expenses by using certain tax credits. These credits have been introduced by the IRS to make higher education more accessible and less financially burdensome for students and parents.

American Opportunity Credit 

This credit is available until 2017 and provides an eligible student the maximum credit amount of $2,500. Required course materials can also be deducted as a qualifying expense. Other qualifying expenses include tuition fee, course-related books, supplies and equipment. The credit can be claimed for all four post-secondary education years.

Individuals with a modified adjusted gross income of $80,000 or less, or married couples filing jointly with the modified adjusted gross income of $160,000 or less can get the full credit. For those with higher income levels, the credit is phased out.

Lifetime Learning Credit

Students can claim a credit of up to $2,000 for qualified education expenses if they are studying in an eligible education institution. The term ‘lifetime’ is used for this credit because it has no limit as to the number of years it can be claimed by a student. It must be noted that a student cannot claim both the Lifetime Learning Credit and the American Opportunity Credit for a year.

A student, parent or a qualifying individual can claim the Lifetime Learning Credit only if:

Lifetime Learning Credit is suitable for students who are only taking one course, whereas American Opportunity Credit is suitable for those pursuing a degree. Either of the two credits can be claimed for a year. In case of two or multiple students, you can claim one credit for each student in the same year.

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