Information about Education Tax Credits
Getting an education may seem like a big expense. But education tax credits could potentially help defray those expenses for those that qualify.
Read on to learn about two education tax credits.
Education Tax Credit #1 - American Opportunity Credit
Formerly known as the Hope Credit, the American Opportunity Credit could allow taxpayers who qualify to claim up to $2,500 annually for expenses, books, equipment, and even computers required for school.
What's new?
According to IRS.gov, the changes to this education tax credit expand the coverage from two years of undergraduate study to four, and raise the maximum income limits — the full credit is available for individuals making up to $80,000 or couples filing jointly who make up to $160,000, and partial credit could be available for those earning more than those amounts.
What programs and expenses qualify?
This credit could be available for students who are enrolled at least half time at an accredited post-secondary school, whether it's a community college, university, or online program, and provides credit for 100 percent of the first $2,000 of qualifying expenses, as well as 25 percent of the next $2,000.
And remember — this isn't a tax deduction; if you qualify for this credit, the amount is taking directly off the taxes you owe, so it could potentially result in a much lower tax bill or a much higher return. Even taxpayers who owe little or no taxes could qualify for a refund of up to $1,000 with this credit.
Education Tax Credit #2 - Lifetime Learning Tax Credit
But what if you're not enrolled in an undergraduate program? If you're pursuing a graduate degree, a certificate program, or individual courses, there are still education tax credits which you could potentially qualify.
What's meant by "lifetime learning"?
Would you like to go back to school, but your schedule only allows you to take one course at a time? Is there a certification or master's degree that you'd like to pursue?
The Lifetime Learning Credit is designed to help in all these situations, and it can be used for an unlimited number of years (although not at the same time as the American Opportunity Credit).
What programs and expenses qualify?
This education tax credit applies to some students who continue to pursue educational opportunities, and covers 20 percent of eligible expenses up to $10,000 — for a total maximum benefit of $2,000 per household. Qualified expenses — tuition, books, and even computers — as well as school accreditation guidelines are the same as those for the American Opportunity Credit.
The household income limits are also the same — $80,000 if filing individually and $160,000 for those filing jointly, according to IRS.gov.
Wherever you are in your education, there could potentially be education tax credits available to make school more affordable.
