Monthly Archives: June 2012

Tax Credits for Postsecondary Education

American Opportunity Credit and the Lifetime Learning Credit

If you find yourself concerned the about cost of higher education there are two federal tax credits that may apply to you. These credits are called the American Opportunity Credit and the Lifetime Learning Credit.

The American Opportunity Credit and the Lifetime Learning Credit credits can be applied to any post-secondary student paying tuition and fees.  This includes:  you, your spouse and your dependents. Each student can claim only one of the listed credits per year.  For example if your daughter filed for the American Opportunity Credit, then she cannot claim the Lifetime Learning Credit. However, if your spouse is in graduate school or any post-secondary education, he/she has the ability to claim the Lifetime Learning Credit.

Below are important facts you should know if you are considering these credits:

  1. The American Opportunity Credit
  • The credit can be up to $2,500.
  • It is only available for students attending their first four years of higher education.
  • If you owe no taxes you may be able to receive up to $1,000 in refund (forty percent of the credit).
  • The student must be pursuing either an undergraduate degree or other recognized educational credential.
  • Any tuition, fees, course related books and equipment are qualified expense.
  • Taxpayers with an adjusted gross income of less than $80,000, or married couples filing jointly with an income of less than $160,000 can receive the full credit.
  1. Lifetime Learning Credit
  • The credit can be up to $2,000.
  • It is available for courses taken to acquire or improve job skills.
  • The credit will only reduce your tax amount but it will not grant a refund.
  • The student does not need to be degree seeking or earning any recognized education credential.
  • Tuition, fees, course related books, and equipment are qualified expense.
  • Taxpayers with an adjusted gross income of less than $60,000, or married couples filing jointly with an income of less than $120,000 can receive the full credit.

If you do not qualify for these education credits, an alternative option is qualifying for tuition and fee deduction. Tuition and fee deduction can reduce your income by $4,000. You may not claim tuition and fee deduction if you claim any of the above credits for the same year.