It’s that time of year …back to school. Heading off to college can be a stressful time for parents and students. Here are some education benefits the IRS offers to offset some of the cost of college and possibly some stress.
- American Opportunity Tax Credit. This credit has recently been extended through the end of December, 2017. It offers up to $2,500.00 per eligible student and is available for the first four years of post-secondary education. 40% of the credit is refundable which means you can receive up to $1,000.00 of the credit as a refund even if you do not owe any taxes. Tuition and fees, course related books, supplies and equipment all count as eligible expenses.
- Lifetime Learning Credit. You may claim up to $2,000.00 for qualified education expenses on your tax return. Unlike the AOTC there is no limit on the number of years you can claim this credit for an eligible student. The Lifetime Learning credit is not refundable, meaning the credit will only eliminate tax you owe up to $2,000.00.
You can only claim one credit per student on your federal return each year. If you pay college expenses for more than one student in the same year, you can claim the credits on a per student basis, per year basis. In other words, you can claim the AOTC for one student and the Lifetime Learning Credit for another student.
- Student loan interest deduction. You may be able deduct interest on qualified student loans. The deduction could reduce your taxable income by up to $2,500.00 and you don’t need to itemize to claim it.
The education benefits mentioned are subject to income limitations and may be reduced or eliminated depending upon your income.