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College Tax Credits and Deductions

Back to School…What you need to know for your taxes!

Do you have a student that recently headed to college? Are you or your spouse working towards a bachelor’s or master’s degree? If you answered yes, then you need to know about the tax credits and deductions available to help you with your higher education expenses.

American Opportunity Tax Credit

  • Available for four years of post-secondary education
  • Based on tuition and required fees and course materials
  • Credit is worth 100% of the first $2,000 plus 25% of the next $2,000 in expenses
  • 40% of the credit is refundable
  • Credit is phased out if your modified adjusted gross income is over $80,000 ($160,000 for married joint return)
  • Eligible student:
    - Is enrolled in a degree or certificate-seeking program
    - Has not completed the first four years of post-secondary education
    - Carrying at least half-time status
    - Has not been convicted of a felony drug offense
    - The student must be you, your spouse or your dependent

Lifetime Learning Credit

  • No limit on the number of years this can be claimed for post-secondary education
  • Based on tuition and required fees and course materials
  • Cannot claim this and American Opportunity for the same student in same year
  • Based on qualified education expenses up to $10,000 paid for all students
  • Credit is 20% of qualified education expenses and nonrefundable
  • Credit is phased out if your modified adjusted gross income is over $62,000 ($124,000 if married joint return)
  • The student must be you, your spouse or your dependent

Tuition and Fees Deduction

  • Deduction from income even if you do not itemize deductions on Schedule A
  • Based on tuition and required fees and course materials
  • Deduct up to $4,000 of eligible expenses
  • Your modified adjusted gross income must be $80,000 or less ($160,000 for married joint return)
  • The student must be you, your spouse or your dependent

What do I need:

  • Form 1098-T from the institution for tuition expense
  • Receipts for course materials necessary for enrollment in the class
  • Record of expenses paid with tax exempt funds (i.e. grants, scholarships, education savings accounts)
  • Must be able to claim the student as a dependent

Be sure to talk to your accountant about the best option for your situation.

This is provided for informational purposes only and is not inclusive. Please consult your tax advisor for more information on how this affects you!