College Tuition and Tax Credits


Many students are going back to school due to the economy, a job loss, or just being ready to reinvent their careers. Students should be aware of a couple of tax programs to help with paying for college. They are called the Hope/American Opportunity and the Lifetime Learning tax programs. A student may not claim both on their taxes. It is an either/or type of situation. These programs help by reducing the amount of taxable income.

HotcoursesUSA does a nice job of explaining the two programs:

The Hope/American Opportunity Tax Credit:

General Facts:

  • Must be enrolled at least half-time in a program leading to an undergraduate degree or other legitimate education credential.
  • The maximum yearly credit per eligible student is $2,500.
  • Partially refundable, which means up to $1,000 could be paid back to lower-income taxpayers when the credit exceeds their total tax bill.
  • There is no limit on how many family members can receive the credit.
  • Amount of credit begins to phase out if your AGI single return is between $80,000 and $90,000 or more and for a joint return is between $160,000 and $180,000 or more.
  • The student must be listed as a dependent on the tax form for parents or guardians to claim a Hope credit for their child’s college expenses.
  • A student can claim credit if they are not listed as a dependent on another person’s tax form.

The Lifetime Learning Tax Credit:

General Facts:

  • The Lifetime Learning credit can only be used for tuition and fees. The credit can be claimed for 20 percent of the amount you pay.
  • A taxpayer may claim a tax credit for 20% of up to $10,000 in a combination of tuition and fees. This equates to a $2,000 tax credit in 2008 and 2009.
  • Amount of the credit begins to phase out if your AGI single return is between $50,000 and $60,000 and for a joint return between $100,000 and $120,000.
To find out more information about these tax credits, check out the site.  The IRS site includes helpful graphs to explain eligibility.