Higher Education? Bigger Tax Credits Available
As the cost of tuition continues to rise nationwide and our economy slides deeper and deeper into recession, post-secondary education can quickly drain your bank accounts and help you rack up debt. The IRS hasn’t been caught totally unaware of these phenomena, however, and there may be some “Hope” for your wallet yet. If you attended college in 2008, there may be education tax credits that you can claim on your federal income tax return this year. As credits, you can subtract their entire amount from your federal income tax. The two major education tax credits are the Hope Credit and the Lifetime Learning Credit.
The Hope Credit can be worth up to $1,800 per eligible student, per year. It can be applied to the first two years of post-secondary education, but not to any further years in an undergraduate program, graduate program or professional-level program. Those who qualify are allowed to credit 100% of the first $1,200 of qualified tuition and feeds paid during the tax year, plus 50% of the next $1,200. To qualify for the Hope Credit, students must not have had a federal or state felony conviction for possessing or distributing a controlled substance as of the end of the tax year and they must be enrolled at least half-time in their academic program.
The Lifetime Learning Credit is a credit that applied to all undergraduate, graduate and professional degree students, no matter how many years they have been in their programs. For those who qualify for the credit, it is equal to 20% of the first $10,000 of post-secondary tuition and fees. The maximum credit is $2,000 per tax return.
There may be extra tax credits available to students in Midwestern disaster areas, as determined by the IRS.
You cannot claim both the Hope and Lifetime Learning Credits for the same student in the same year.
You can only qualify for the credits ifyou are paying for post-secondary education for yourself, your spouse or a dependent. If you are a dependent in post-secondary education, you cannot claim the credit in addition to whoever has claimed you as a dependent.
You cannot claim the credits if you claim a tuition and fees deduction in the same year.
This entry is for information only and does not constitute tax advice, nor does it serve as legal advice. There is no intent to create, nor does this blog site constitute, a professional tax practitioner/client relationship. You need to consult with your tax professional prior to acting on any item of information you learn on this site.
Tax laws change from time to time, and are different in various locations.