At tax time, students and those who have graduated may be eligible for special education tax credits that can significantly save them money.
American Opportunity Credit
Students who are enrolled in their first four years of college may claim this credit worth up to $2,500 in tuition, activity fees, books, equipment and supplies. The student must be enrolled at least half-time and must not have any felony drug convictions on their record. Parents of students can also claim the credit on behalf of their eligible child, if the same student is claimed as a dependent on their tax return. This credit phases out at higher incomes, maxing out at $90,000 in annual income for single filers, with double that ($180,000) for joint taxpayers.
Lifetime Learning Credit
Like the AOC, the Lifetime Learning Credit is used for tuition, fees, books, equipment and supplies, up to $2,000. However, this credit extends beyond the first four years of undergraduate education, allowing those taking graduate courses and classes that don’t lead to a degree to also be eligible to claim the credit. There aren’t any requirements for enrollment time, meaning you can be a full-time or part time student. You can only claim this credit once on your return, no matter how many eligible students you claim, and the credit maxes out at $2,000. Like the AOC, there are income phaseouts to be aware of: single filers- Modified adjusted gross income of $65,000; joint filers – $131,000 modified adjusted gross income.
Though both credits are excellent money savers for student sand their families, you are only able to claim one of the credits, so choose wisely. If you opt for the AOC, you can’t claim the Lifetime Learning Credit, and vice versa.
