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:
- 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:
- 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.