Education Tax Credits

There’s no doubt about it – each and every year it becomes more and more obvious that to be successful in our modern times you need more education than just a high school diploma. And just as obvious is the fact that schooling costs are spiraling upwards. With fewer and fewer jobs available during this economic crunch, the new hires with the best education are usually the first ones brought on board.

Luckily, there is some help and relief from this mess and expense and it comes in the form of education tax credits. These education tax credits help make the investment hit your wallet a whole lot less, and give some people the chance to go to school when they otherwise couldn’t. There are a couple of main ways that you can use to lessen the cost of education with these tax credits, and all of them are completely legal and set up by the government.

Education Tax Credits – American Opportunity Credit

The American Opportunity education tax credits were originally created and passed into law by the Obama administration. The main purpose of these education tax credits was to help students and their parents lessen the amount of money that they had to pay for their college education. Taxpayers are now allowed to qualify for education tax credits up to $2500 each and every year, so long as your student stays in school. If your student doesn’t pay taxes, almost 40% of it is refundable so you could be looking at a $1000 check.

Education Tax Credits – Hope Tax Credit

These education tax credits, the Hope Tax Credits, were established in the Clinton years and have been revamped in 2009 and 2010, making it more and more available to a wider base of people. These education tax credits apply only to those students who are attending school in the Midwestern disaster area, and allows for up to $3600 in education tax credits. You cannot combine these tax credits with the American Opportunity credits, however; you must choose one or the other.

Education Tax Credits – Lifetime Learning Credit

This is another holdover from the Clinton administration, and is basically used to help lower the amount of money you need to spend when attending not just colleges and universities, but also adult educational programs, job trainings, and graduate school. These kinds of education tax credits are set up to help anyone who is furthering their adult education, and can be redeemed for up to $2,000 on each year’s tax return. This also has the added bonus of being valued at up to almost $4,000 when you attend a school, job training, or other adult education program in the Midwest disaster area. Still, you cannot combine these education tax credits with any other offers in the same tax year, but could use different tax credits for different students if you’re their parents.

Education Tax Credits – Tuition and Fees Deduction

These education tax credits are set up so that students or their parents will be able to deduct the cost of tuition and other college expenses up to $4,000 from their taxes. However this differs from the other education tax credits, and is a deduction rather than a tax credit. This means that you’ll have to take the deduction from your taxable income number, not the calculated amount of taxes owed. Like the others, you won’t be able to claim this in conjunction with any of the other tax credit programs.

Education Tax Credits – Student Loan Interest Deduction

These tax credits are only offered to those people who paid interest on a student loan in the year 2009. There are several wrinkles to qualifying though – cannot have the filing status of married, filling separately, your AGI is less than $70,000, and you cannot be claimed on someone else’s tax return. The deductions are good for up to $2,500.

In general, availing yourself of some education tax credits can be the difference between being able to afford school and furthering your education and not. This is a big deal, especially as the price of school and adult education continues to soar, but you should know that there are options that make it easier on you financially. The best advice you’ll be able to get on whether or not you specifically qualify for any of these programs is from a CPA or trusted financial advisor. Any and all of these programs will most likely be updated and changed in the future, so your best bet is to get professional advice before filing for any on your tax returns – for some reason, the government takes those things pretty seriously and doesn’t appreciate when there are mistakes. Hopefully this quick little guide was helpful, and we wish you the best of luck moving forward with your continued education!

 

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