PHOENIX, Ariz. – Going to college can be a financially stressful time for students and parents. The Internal Revenue Service offers tips on education tax benefits that can help offset some costs and perhaps make the experience more enjoyable.
American Opportunity Tax Credit
This credit can be up to $2,500 per eligible student and is available for the first four years of post-secondary education. 40 percent of the credit is refundable, which means that you may be able to get up to $1,000 back, even if you don’t owe any taxes. Qualified expenses include tuition and fees, course-related books, supplies and equipment. A recent law extended the credit through the end of December 2017.
Lifetime Learning Credit
With this credit, you may be able to claim up to $2,000 for qualified education expenses on your federal tax return. There is no limit on the number of years you can claim this credit for an eligible student.
Student loan interest deduction
You may be able to deduct interest you pay on a qualified student loan, which can reduce your taxable income by up to $2,500. You don’t need to itemize deductions to claim it. Such education benefits are subject to income limitations and may be reduced or eliminated depending on your income.
You can claim only one type of education credit per student on your federal tax return each year. If you pay college expenses for more than one student in the same year, you can claim credits on a per-student, per-year basis. Use the IRS’s online Interactive Tax Assistant tool to help determine if you’re eligible for education credits.
For more information, visit the Tax Benefits for Education Information Center at IRS.gov and read a copy of Publication 970, Tax Benefits for Education. The booklet is available online or by calling 1-800-TAX-FORM (1-800-829-3676.)
Education Tax Credits and Deductions | Video courtesy of the Internal Revenue Service