Education Tax Credits
Tax season is upon us, and you should be aware of the educational tax credits available to you when filing.
The first is the American Opportunity Credit, which began as an extension of the Hope Credit Act of 2009. The American Opportunity act is currently extended until 2017. Among the changes included in its extension are the expenses covered by the credit and the number of years the credit is available. This credit now pays expenses for required course materials in addition to tuition costs, and it is available to cover expenses for four years of post-secondary education instead of just two.
For the American Opportunity Credit, the maximum annual credit amount is $2,500 per student. The full credit is available to single filers with incomes of less than $80,000 and to those filing jointly with incomes less than $160,000. A partial amount of this credit still may be available to those with incomes higher than these levels.
The second is the Lifetime Learning Credit. This is a maximum $2,000 credit available to students and parents paying for school. As the name indicates, there is no limit on the number of years that this credit can be claimed. It is particularly useful to graduate students, those who are only taking one course, and those who are taking courses but not pursuing a degree.
You can claim this credit if you are paying eligible educational expenses for an eligible student who is yourself, your spouse, or a dependent. The full credit is available to single filers with incomes of less than $63,000 and to joint filers with an income of less than $127,000. If you are eligible for both the American Opportunity Credit and the Lifetime Learning Credit, you will only be able to claim one or the other per tax year per person. However, if there are two eligible students in the same family, they can each claim a different credit, but they cannot both claim both credits.
This article explains the tax credits available for education, but there are also tax deductions available for educational purposes. Tax deductions are not the same as tax credits. Tax deductions depend on taxable income, and their value is proportional to the amount of income being taxed. Credits reduce the tax amount overall, and are the same value for everyone who is able to claim the credit.
For more information on the American Opportunity Credit, go to: http://www.irs.gov/uac/American-Opportunity-Tax-Credit
For more information on the Lifetime Learning Credit, go to: http://www.irs.gov/publications/p970/ch03.html
For more information on educational tax deductions, go to: http://www.irs.gov/uac/Tax-Benefits-for-Education:-Information-Center
Originally published at mumoneymatters.tumblr.com.