Tax Breaks

Don’t Overlook These Tax Credits for College

College students—or their parents— may be eligible for one of two tax credits that help offset the cost of tuition and other higher education expenses.

Question: I’ll have two children in college this year – my daughter is starting her junior year, and my son will be a freshman. Can I take the American Opportunity Credit for expenses for both of them?

Answer:

Yes, as long as you meet the income requirements. The American Opportunity Credit is worth up to $2,500 per student for each of his or her first four years of college. It’s calculated as 100% of the first $2,000 paid toward a student’s eligible expenses plus 25% of the next $2,000 spent. Eligible expenses include tuition, required fees and course materials. Room and board don’t count.

The student must be enrolled at least half-time in a program that leads to a degree, certificate or other recognized education credential.

To qualify for this credit in 2017, your adjusted gross income must be less than $180,000 if you’re married and file taxes jointly, or $90,000 if you file as single or head of household. The amount of the credit starts to phase out for joint filers who earn more than $160,000, and single filers or heads of household who earn $80,000.

You can claim the credit by filing IRS Form 8863 with your tax return. For more information, see Instructions for Form 8863.

Students who go to school less than half-time, are in graduate school or take other eligible courses may qualify for the Lifetime Learning Credit. The credit is worth 20% of the first $10,000 spent on eligible expenses for the year – or a maximum of $2,000 per tax return (not per student.) There is no limit on the number of years you can take this credit, but you can’t claim both the American Opportunity Credit and the Lifetime Learning Credit for the same student in the same tax year.

To qualify, your adjusted gross income must be less than $132,000 for joint filers, or $66,000 for single filers and heads of household. The amount of the credit starts to phase out if you earn more than $112,000 if married filing jointly or $56,000 for single filers.

For more information about the rules, see IRS Publication 970 Tax Benefits for Education.

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