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Tax Credits Help Offset Higher Education Costs

If you pay higher for education in 2018 than before, you can see tax savings when you file your tax returns.  If you, your spouse, or your dependents take post-high school coursework, you may be eligible for a tax benefit.

There are two credits available to help you offset the costs of higher education:  the American opportunity credit and the lifetime learning credit.

The American Opportunity Credit

  • Worth a maximum benefit up to $2,500 per eligible student
  • Only for the first four years at an eligible college or vocational school
  • For students pursuing a degree or other recognized education credential
  • Partially refundable. This means if the credit brings the amount of tax owed to zero, 40 percent of any remaining amount of the credit, up to $1,000, is refundable.

The Lifetime Learning Credit

  • Worth a maximum benefit up to $2,000 per tax return, per year, no matter how many students qualify
  • Available for all years of postsecondary education and for courses to acquire or improve job skills
  • Available for an unlimited number of tax years

To be eligible to claim the American opportunity credit, or the lifetime learning credit, the law requires you or a dependent to have received a Form 1098-T from an eligible educational institution.

 

For more information on education tax credits, always consult a Certified Public Accountant.  Submitted by: Ying Wang, Senior Manager, Tax Services, Thomas Howell Ferguson P.A. CPAs. To ask Ying a question, contact her here.

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