Getting a college degree or taking classes to enhance your credentials can be expensive. Thankfully Uncle Sam has devised a few ways to lighten your financial load as you increase your course load. There are many higher education tax credits to choose from.
You cannot claim more than one tax benefit for each education expense. But choosing the best education tax credit or deduction can be tricky. Read on to learn which tax credit or deduction will save you the most.
Determining Your Eligibility
You could be eligible for an education tax credit or deduction if:
• You're a student and no one else claims you as a dependent.
• Your spouse is taking at least one post-secondary level class.
•Your dependent child is a college student or is taking a college-level class.
Both you and the student you are claiming on your taxes must qualify to receive education tax benefits. To be eligible, you must owe taxes. You can only take a credit up to the amount of taxes you owe. Married couples filing separately are not eligible for education tax credits or deductions. Once you determine that you are eligible, you are ready to choose your education tax credit or deduction.
Hope Floats Your Pocketbook: The Hope Credit
This Hope Credit is subtracted directly from the tax your family owes instead of being taken from taxable income like a tax deduction. The credit:
• Covers tuition and certain fees such as books and supplies,
• Can grant you up to $1,650/year for each eligible student,
• Offers 100% tax credit for the first $1,500 paid for qualified expenses and 50% tax
credit for the second $1,000.
To claim the Hope Credit, your income must be $57,000 or less if you are a single taxpayer, or $113,000 or less if you are a married taxpayers filing a joint return. The exact amount of the credit you will get depends on your family's income, the amount of tuition you pay, and any scholarships or tuition assistance you receive.
Choose the Hope Credit if:
• You have more than one eligible student in your family.
The total credit is based on how many eligible students are in the family, rather than a maximum dollar amount you pay, as with the Lifetime Learning tax credit.
• You (or a dependent) are in the first two years of a degree or certificate program.
The student must be enrolled in the first two years of a program that awards a degree or certificate.
• You (or a dependent) are enrolled at least half time.
The student must be enrolled for one academic term beginning in the tax year for at least half-time study.
• You have not been convicted of a federal or state drug felony.
The Hope Credit does not offer benefits for convicted drug felons.
Learn Strong with the Lifetime Learning Credit
The Lifetime Learning Credit is good news for people going back to school. The credit is earmarked for continuing education students and is available to students studying at any level. Here are some facts about t