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Tuition/Financial Aid > Money Matters > Tax Credits

Tax Credits



During School: Lifetime Learning and American Opportunity Tax Credits

The amount of the credit is subtracted directly from a family’s actual tax liability, rather than reducing taxable income like a tax deduction does. The lifetime learning and American opportunity credits are not refundable.

 

American Opportunity Credit  The American opportunity credit modified the existing Hope credit for tax years 2009 and 2010, and later was extended through 2017. The extension allows more taxpayers, many of whom have higher incomes or owe no tax, to take advantage of the benefit. Many of those eligible taxpayers qualify for the maximum annual credit: $2,500 per student.

The full credit is available to individuals whose modified adjusted gross income is $90,000 or less, or $160,000 or less for married couples filing a joint return. Taxpayers with incomes above these levels are not eligible for the credit. For more information about the American opportunity credit, see these questions and answers.

Lifetime Learning Tax Credit  To qualify for the lifetime learning credit, the taxpayer must report the amount of tuition and fees paid, as well as the amount of certain scholarships, grants and untaxed income used to pay tuition and fees. Under the current law, schools must supply this information on form 1098-T to individual taxpayers and to the IRS. The taxpayer may claim the tax credit and figure the amount to claim by completing parts II and III of IRS Form 8863.

For the tax year, you may be able to claim a lifetime learning credit of up to $2,000 for qualified education expenses paid for all students enrolled in eligible educational institutions. Income qualifications require the modified adjusted gross income to be $62,000 or less if single, or $124,000 or less for married couples filing a joint return.

According to the IRS, you generally can claim the lifetime learning credit if you meet all three of these requirements:
  • You pay qualified education expenses of higher education.
  • You pay the education expenses for an eligible student.
  • The eligible student is either yourself, your spouse or a dependent for whom you claim an exemption on your tax return.
There is no limit on the number of years the lifetime learning credit can be claimed for each student. However, a taxpayer cannot claim both the American opportunity credit and lifetime learning credits for the same student in one year. Thus, the lifetime learning credit may be particularly helpful to graduate students.

Enrollment Requirements

 

An eligible student may be enrolled at least half-time in an eligible program leading to an undergraduate or graduate degree at an eligible school during the calendar year or may be enrolled at any enrollment level in any course of instruction at an eligible school to acquire/improve the student’s job skills during the calendar year. The student may claim the credit if the student is not claimed as a dependent by another taxpayer. Get details here

During and After School: Student Loan Interest Deduction

 

Taxpayers with qualified student loans may deduct the interest they paid for themselves, their spouse or their dependents. You do NOT have to be in repayment to be eligible for this deduction. Your voluntary payments of interest and required payments both are eligible. This deduction is an adjustment to taxable income, so a taxpayer may claim the deduction even if they do not itemize deductions on Form 1040’s Schedule A. The maximum deduction is $2,500 per year. 

Adapted from the IRS, Tax Benefits for Education Information Center.