Tax Credits for Students
With the cost of tuition on the rise, along with other expenses, such as books and supplies, attending college is more costly than ever before. Fortunately, the government is doing what they can to ease the burden for students who need financial assistance. There are many tax credits that you should be aware of if you are a student or parent.
The Lifetime Learning Tax Credit is one of the most common. Students who take at least one class are eligible for this tax credit, as long as they meet all the requirements. It is important to note that both graduate and undergraduate schools are included. If you qualify, you can receive a 20 percent tax credit for the first $10,000 spent on school related expenses. The maximum allowable tax credit is $2,000. To be eligible for this tax credit, joint filers must have an adjusted gross income of $105,000 or less. Single filers are required to have an adjusted gross income of less than $52,000.
Many students are also in position to take advantage of the Hope Scholarship Tax Credit. This tax credit is open to students who are in their first two years of undergraduate school, and are enrolled at least as a “half-time” student. The income requirements are the same as they are for the Lifetime Learning Tax Credit. Those who qualify are eligible to receive 100 percent of the first $1,000 spent and 50 percent of the next $1,000. The maximum allowable Hope Scholarship Tax Credit is $1,500. (Note: If you are filing for this tax credit you must not have any past felony convictions which include the possession and/or distribution of controlled substances.)
As a student or the parent of one, you should consider these education tax credits when it comes time to file. By taking advantage of either one, you can greatly reduce your income tax bill.
What if I don’t qualify for any of these tax credits for students? In this case, you are not out of luck just yet. You can still better your tax situation ― just not by using tax credits. Instead, you can consider the Education Tuition and Fees Tax Deduction. Remember that this is a tax deduction, not a tax credit.
It is important for students to know which tax credits are available, as well as whether or not they quality. If you are eligible, be sure to take full advantage. Regardless of the amount of your tax credit, you are going to save money.