Do You Get a Tax Credit for Going to School?

Going to college may qualify a family for a dollar for dollar deduction on their tax bill, called a tax credit. In 2010 and possibly later, the main tax credit is at its most valuable. Just because you enroll in a class does not mean you automatically qualify for a credit. If you do not qualify for a credit, however, you may still get a deduction.

  1. Identification

    • You can take an education tax credit when you accrue qualified education expenses during the year. Qualified expenses for a tax credit are those that are required by the university or college, such as tuition, but not used for personal reasons. If you live off-campus, for example, you cannot count a vehicle as a qualified expense even if you need one, because it is not required.

    Eligibility

    • Even if you have qualified expenses, you still have to meet eligibility requirements to claim a tax credit. For year 2010 taxes, the federal government increased the value of the Hope Credit, the traditional educational tax credit, and called it the American Opportunity credit. To claim this one, you have to have expenses in the fiscal year for which you claim them. In 2010, for example, you cannot claim this award if you did not have expenses until the 2011 academic calendar year. Also, only the person who pays for qualified expenses can claim this credit.

    Lifetime Learning Credit

    • The Lifetime Learning credit is much easier to claim than the American Opportunity. Unlike the American Opportunity credit, you can claim the Lifetime Learning credit for an unlimited number of years, but it is not refundable. You can also use the Lifetime credit for any level course -- graduate or undergraduate -- even if you are not enrolled in a program leading to a degree.

    Tip

    • If you do not qualify for either of the tax credits, you may be able to deduct tuition and other qualified costs. Deductions reduce your taxable income. So, if you earned $40,000 and had $3,000 in expenses, the IRS would only tax you on $37,000. You can only claim one credit or deduction in any given year, according to the IRS. The tuition deduction is an above-the-line deduction, which means you do not have to itemize to claim it.

Related Searches

References

  • Photo Credit tax forms image by Chad McDermott from Fotolia.com

You May Also Like

Related Ads

Check It Out

Make-at-Home Vs. Takeout: Pumpkin Pie