You don’t have tell me how expensive college is, I’ve got a college tuition that I have been paying for the past three years.
If you’re like me you are always on the look-out for a way to reduce the cost and get back some of your money during the tax season.
Here are a few tax breaks that you can take advantage of during this year that will help put some of your money back into your pockets:
1. American Opportunity Tax Credit
$2,500 in tax credits on the first $4,000 of qualifying educational expenses. Under the American Recovery and Reinvestment Act (ARRA), more parents and students are eligible to qualify over the next two years for a tax credit.
This tax credit first became available during the 2009 tax year. It was designed to modify the existing Hope tax Credit for tax years 2009 and 2010. This modification, allows a broader range of taxpayers, including many with higher incomes and those who owe no tax to qualify.
It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.
The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return.
The credit is phased out for taxpayers with incomes above these levels. These income limits are higher than under the existing Hope and Lifetime Learning Credits.
Note: This tax credit is schedule to be available from 2009 thru 2012, but Congress could extend it.
The Lifetime Learning Credit, is also available to taxpayers who have incurred education expenses. For this credit to be claimed by a taxpayer, the student must attend school on at least a part-time basis. Individuals eligible for this credit are the taxpayer, the taxpayer’s spouse, or the taxpayer’s dependent.
This credit allows for a 20% tax credit for first $10,000 of qualified tuition and expenses to be fully creditable against the taxpayer’s total tax liability. The maximum amount of the credit is $2000 per eligible student. The credit is available for net tuition and fees (less grant aid) paid for post-secondary enrollment.
Details regarding the Lifetime Learning Credit are below:
It is worth up to $2,000
The credit is available on a per-taxpayer (family) basis, and is phased out at the same income levels as the Hope Scholarship Credit available for single filers with income below $48,000 (partial credit for those between $48,000 and $58,000) and joint filers with incomes below $96,000 (partial credit for those between $96,000 and $116,000)
Allows for 20% of the first $10,000 in qualified tuition and related expenses.
Individuals eligible for this credit are the taxpayer, the taxpayer’s spouse, or the taxpayer’s dependent if not claimed as a dependent.
It may be used for college tuition at any level (part-time, also)
If you choose, you can claim an education tax deduction instead of a college tuition tax credit.
You are allowed to deduct up to $4,000 off your income
Eligible individuals include single filers with income below $80,000 and joint filers with incomes below $160,000, this meant for the parents of a dependent student or for the student if not claimed as a dependent.
The only eligible expenses are room and board type expenses, this deduction may not be used for any expenses other than tuition and fees (like room and board).
Note: This deduction is usually a college tax deduction is used when your income is too high for a higher education tax credit. A school tax credit reduces the amount of taxes you pay and an education tax deduction reduces your income.