This summer is flying by and unbelievable it is almost back to school time. As you pack up your kids to head off to college we thought it is an opportune time to talk potential tax benefits available for taxpayers paying for college.
Taxpayers who pay for higher education in 2018 can see tax savings when they file their tax returns. If taxpayers, their spouses or their dependents take post-high school coursework, they may be eligible for a tax benefit.
There are two credits available to help taxpayers offset the costs of higher education. The American opportunity credit and the lifetime learning credit may reduce the amount of income tax owed.
The American opportunity credit is:
- 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 is:
- 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 a taxpayer or a dependent to have received a Form 1098-T from an eligible educational institution. All in all, these can be great opportunities to save tax while paying for education.