Rules for Writing Off College Tuition
Writing off college tuition on your yearly taxes will reduce the amount of taxes you must pay the Internal Revenue Service and may even result in a tax refund. Tax credits will reduce the amount of tax the IRS requires you to pay directly whereas a deduction reduces the amount of your income that is taxable. You can take education credits and deductions even if you do not itemize your deductions. The IRS revises education deductions and credits annually. Thus, credits and deductions may change or even be eliminated at some point.
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American Opportunity Credit
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The American Opportunity Credit may be claimed for the first four years of college education. Students can receive a credit for up to $2,500 for tuition, book and supply expenses. Single taxpayers with an adjusted gross income above $90,000 and married taxpayers with an adjusted gross income above $180,000 will receive a reduced credit amount based on their income. To qualify for this credit, you must be pursuing a degree.
Lifetime Learning Credit
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The Lifetime Learning Credit provides a credit of up to $2,000 for tuition, book and supply expenses. The Lifetime Learning Credit can be claimed for an unlimited number of years, but it cannot be claimed along with the American Opportunity Credit. The Lifetime Learning credit is not available to single taxpayers earning more than $60,000 or married taxpayers earning more than $120,000. You can claim this credit even if you are not pursuing a specific degree.
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Tuition and Fees Deduction
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Another option to consider when writing-off education expenses is the tuition and fees deduction. This deduction allows you to decrease your taxable income by as much as $4,000; thus, your tax will be less. To determine whether an education credit or an education deduction will be more financially beneficial, compute your taxes both ways to compare your bottom line.
Qualified Expenses
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Qualified educational expenses include tuition, registration fees, textbook costs and the cost of required supplies and equipment such as scientific calculators or art supplies. When taking an education deduction or credit, total all of your qualified education expenses. Most of your expenses will be reported on the 1098-T form which will be sent to you by your school. However, you may have addition supply and equipment expenses not reported on the 1098-T. You cannot claim room and board expenses.
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References
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