Education Tax Credits

Learn how to pay for college with a little help from Uncle Sam!

Here are some key facts you should know about these education credits:

The American Opportunity Credit

1. The credit is a maximum of $2,500 per eligible student.

2. It is available for the first four years of post-secondary education.

3. Forty percent of the credit is refundable, which means that you may receive up to $1,000, even if you owe no taxes.

4. The student must be pursuing an undergraduate degree or other recognized educational credential.

5. The student must be enrolled at least half time for at least one academic period.

6. Qualified expenses include tuition and fees, course related books, supplies, and equipment.

7. 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.

The Lifetime Learning Credit

1. The credit is a maximum of $2,000 per eligible student.

2. It is available for all years of postsecondary education and for courses to acquire or improve job skills.

3. The maximum credited is limited to the amount of tax you must pay on your return.

4. 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.

5. 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, Tax Benefits for Education available at http://www.irs.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).

As always, consult with your tax adviser to make sure that you are keeping the records you need to prove the income you've earned and the deductions you've taken in your tax return.


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Charlie Seitz has prepared over 10,000 tax returns at latest count. His ezine, Terrific Tax Tips, gives taxpayers tools they need to intelligently reduce the taxes they pay. Find out more at: -> http://www.taxpertonline.com