If you, your spouse, or a dependent is heading off to college, there are some important tax-saving tips you should know about. Here’s what the IRS says:
The American Opportunity Tax Credit (AOTC) can save you up to $2,500 annually, and applies for the first four years of higher education. 40% of the AOTC is refundable, which means you may be able to get up to $1,000 of the credit as a refund, even if you don’t owe any taxes.
The Lifetime Learning Credit (LLC) allows you to claim up to $2,000 on your federal tax return for an eligible student. Unlike the AOTC, the LLC has no limit on the number of years you can claim the credit.
Keep in mind that you can claim only one type of education credit per student on your federal tax return each year. So, if you have two students in your household, you can claim the AOTC for one, and claim the LLC for the other.
Only qualified education expenses can be used to calculate credits, such as tuition, fees, and other related expenses. The student must also be attending an eligible institution, which is generally any degree-granting institution beyond high school. Consult a qualified tax expert to learn about the additional rules governing eligible fees and education credits.
For more information about education tax credits and other college-related tax issues, consult a qualified tax expert or check out check Publication 970, “Tax Benefits for Education” on IRS.gov.
Tip courtesy of IRS.gov[i]