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How to Claim Education Tax Credits

Posted by Admin Posted on Mar 28 2017

One of the most common tax credits available is the education tax credits. There are two tax credits that help cover common student expenses: the American Opportunity Credit and the Lifetime Learning Credit.


The American Opportunity Credit can save you up to $2,500 in taxes for the education expenses of an eligible student. In order to qualify for this tax credit, the student must purse a degree at a school that is eligible to participate in the federal student aid program. The credit is only available during the student’s first four years of attendance who enroll at least half time for one academic period during the tax year. The student must not possess any felony drug conviction to be eligible. You can claim the credit for yourself or if a dependent meets these criteria. If you are claimed as a dependent by someone, you will not be able to claim the credit on your taxes. If you have more than one dependent who meets the criteria, you can claim multiple credits 


The credit includes the costs for tuition, fees and course-related materials and supplies. It does not cover room, board, insurance, athletics or other activities. If the credit brings the amount of tax you owe to zero, you can have 40 percent of the remaining credit (up to $1,000) refunded to you.


The Lifetime Learning Credit is beneficial for a student who is not eligible for the American Opportunity credit because they have a smaller course load or because they have already completed four years of college. It can help pay for undergraduate, graduate and professional degree courses. It is available to all taxpayers who attend at least one course during the year at a school that is eligible to participate in the federal student aid program. 


It helps to cover the cost of tuition and fees, as well as, books and supplies. The credit covers 20% of up to $1,000 of education expenses. The maximum benefit of the credit is $2,000 but unlike the American Opportunity Credit, it is nonrefundable if it exceeds your tax bill. 


It is important to note that you cannot claim both credits for the same student in the same year. If you are eligible for both credits, it is best to work with a tax professional to see which would be most beneficial to you.


You can use the IRS app to determine if you are eligible for these credits. 


To claim the credit, you will need to fill out Form 8863 and attach it to your tax return. The rules for these credits can be confusing so you want to ensure you work with a tax professional or learn more about both credits on the IRS website before you claim them.



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