Question & Answer


January 2015

With the dramatic increase in the costs of a college degree, many people are looking for ways to help offset those costs. The American Opportunity or Lifetime Learning Tax Credits are two options available to taxpayers who pay qualifying expenses for an eligible student (the taxpayer, spouse and dependents). The American Opportunity Tax Credit provides a maximum $2,500 credit for each eligible student. Because of this credit’s higher limit, it is used predominantly for students in their first four years of college. The Lifetime Learning Credit provides a maximum credit of $2,000 per tax return and is used predominantly for a student’s post-baccalaureate years or non-degree programs. Though a taxpayer often qualifies for both of these credits, only one can be claimed for each student each year. The credits are subject to student eligibility requirements and income limits that could reduce the amount claimed on your tax return.

In addition to tax credits, students may alternatively qualify for a tuition tax deduction of up to $4,000 on federal or state income taxes. There are many other tax planning strategies related to the funding of college education costs that could help you save taxes and achieve those college goals. Please give us a call to further discuss these issues.