College is expensive, but several education credits can help ease the financial blow. These credits can be claimed for qualified education expenses, including tuition and fees required for enrollment at eligible post-secondary educational institutions.
American Opportunity Credit
The American Opportunity Tax Credit (AOTC) is available for eligible students during the first four years of higher education. Although the credit was set to expire at the end of 2012, it was extended through December 2017 by the American Taxpayer Relief Act of 2012.
The maximum credit is $2,500 per student. If the taxpayer has no tax liability, 40 percent of the tax credit may be refundable. Single taxpayers with a Modified Adjusted Gross Income (MAGI) of $80,000 or less or Married Filing Jointly taxpayers with a MAGI of $160,000 or less can take advantage of the full credit. Incomes over those thresholds will see the credit phased out.
Lifetime Learning Credit
The Lifetime Learning Credit can be claimed for tuition and fee payments for any year of post-secondary education, whether or not you are working toward a degree. The maximum credit is 20 percent of up to $10,000 in eligible costs. Single taxpayers with a MAGI of up to $55,000 and Married Filing Jointly taxpayers with a MAGI of up to $110,000 can take advantage of the full credit.
“Double dipping” of benefits is not allowed, so only one type of education credit can be claimed for each student per tax year. You’ll fill out Form 8863 to claim the credits. If you are claiming the tax credit for yourself, you cannot be claimed as a dependent on another payer’s tax return.