Can I Take Tax Credits for My College Student for 5 Years?
You can take certain tax credits and deductions for qualified, higher-education expenses for five years as long as the student still qualifies as your dependent. If you are divorced or separated, you may continue to take higher-education tax credits if you are the custodial parent.
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Tax Credit Qualifications
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You can continue to take most, but not all, available tax credits if your college student is under the age of 24 at the end of the year and a full time student. If your child is enrolled in school for the number of credit hours that constitutes a full-time student according to his school's specific enrollment polices, the IRS considers him a full-time student for tax purposes. The IRS does not consider schools that offer online classes only as a school. Therefore, if your child is attending an online only school, you do not qualify to take any tax credits or deductions for higher education expenses.
Available Tax Credits
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The IRS offers the Lifetime Learning and American Opportunity tax credits for higher education expenses. The IRS does not impose time limits for the Lifetime Learning credit. As long as your student qualifies, you may take the credit for the fifth year of college. However, the American Opportunity tax credit is only available for the first four years of college, so you would no longer qualify to take this credit in the fifth year.
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The Lifetime Learning Tax Credit
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You can claim the Lifetime Learning tax credit for your college student for five years as long as you can claim her as a dependent on your federal taxes and if she is under age 24. The maximum amount for the Lifetime Learning credit is 20 percent of the qualified higher education expenses that you paid, up to $10,000. This makes the maximum credit amount $2,000 ($10,000 x 20 percent = $2,000).
Considerations
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The IRS also offers tuition and fees tax deductions for higher education expenses. Unlike a credit that lowers the amount of taxes you owe, a deduction reduces your adjusted gross income and could result in a lower tax rate. Your child must still qualify as dependent to take the tax deductions. You cannot take both the Lifetime Learning credit and the higher education tuition and fees tax deduction for the same student in the same tax year. You should consult a tax professional to find out which tax benefit is most advantageous to you.
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