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Student Tax Credits

The cost of an education is more expensive now than ever. College tax credits help mange the expense of high tuition, textbooks, and more for eligible students. The U.S. Government provides several sizable student tax credits. These credits are available to students attending eligible colleges and universities, and could save students thousands of dollars a year.

To claim your student tax credit, you simply use IRS form 8863. Tax software can serve you well by calculating which education credit you fit into. As you can see below there are guidelines for each student credit and you can’t take both.

The Lifetime Learning Credit

  • Maximum credit up to $2,000 credit per return
  • Phase out limits on modified adjusted gross income – $124,000 if married filing jointly;  $62,000 if single, head of household, or qualifying widow(er)
  • This credit is nonrefundable, and is limited to the amount of tax you must pay on your taxable income
  • No limit on number of years of postsecondary education and for courses to acquire or improve job skills
  • This tax credit is available for an unlimited number of years
  • Student can take classes without pursuing a degree or other education credential or certificate
  • Student can take only one class or more classes
  • Tax credit covers tuition, required enrollment fees, course related books, supplies, and equipment

The American Opportunity Credit

  • Up to $2,500 credit per eligible student
  • Phase out limits on modified adjusted gross income – $180,000 if married filing jointly;  $90,000 if single, head of household, or qualifying widow(er)
  • This credit may be 40% refundable; the rest is nonrefundable
  • This credit is available only if the first 4 years of postsecondary education had not completed the before 2012
  • This tax credit is only available for 4 tax years per eligible student which includes any year or years the Hope credit was claimed
  • Student must be pursuing a degree or other recognized education certificate or credential
  • Student must be enrolled at least half time for at least one semester during the year
  • This credit covers qualifying expenses as tuition, fees, course materials whether or not the materials are bought at the school as a condition of enrollment or attendance

Tuition and Fees Deduction

  • This deduction can reduce the amount of your taxable income by up to $4,000
  • This deduction is an adjustment to income and can be claimed even if you do not itemize deductions
  • If your income is too high for the other credits you may be able to take this deduction
  • This deduction typically can be taken if you paid qualified education expenses of higher education, or if you paid the expenses for an eligible student. The student has to be yourself, or your spouse, or your dependent which you claim on your tax return
  • This deduction cannot be taken if you are married filing separately, or if another person can claim you as a dependent, or if your modified adjusted gross income is more than $80,000, or $160,000 if filing a joint return, or if you’re a non-resident alien for any part of the year, or if someone else has paid the education expenses for the student

When it comes to tax breaks for students the three big categories are credits, deductions, and savings plans such as, the 529 plans which are pre-paid savings for college.

To claim your tax credits for students file your tax return with reputable tax software. Accountants also use tax software to ensure an accurate calculation of the return, and to avoid costly errors which may result in an audit, fines, or penalties.

TurboTax provides step by step guidance for tax filers who need professionals to advise them on how to claim tax credits for higher education correctly without errors. Get started today to guarantee your peace of mind, and biggest tax refund possible.