Education tax credits are credits that you can claim for part-time or full-time students that meet certain requirements. There are two types of education tax credits: The American Opportunity Credit and the Lifelong Learning Credit.
These credits reduce your tax liability on a dollar-for-dollar basis until the point where your liability reaches zero. However, these credits are only applicable if your circumstances meet the requirements described below.
- The American Opportunity Credit: This credit covers four years of college for a qualifying student. The amount of the credit is based on expenses such as tuition, fees, and course materials like textbooks or lab equipment.
The maximum credit you can receive for these expenses is $2,500 per student. 40% of the credit is refundable as long as the student is between the ages of 18 and 24, is a full-time student, and does not support themselves.
- Lifetime Learning Credit: This credit is more ideal for part-time students. It covers up to 20% of the first $10,000 of education expenses (tuition, fees, course materials, etc). You can use it for undergraduate studies, graduate studies, or certificate-level courses.
The Lifetime Learning Credit can also be used for improving or acquiring job skills at a qualifying institution.
If you have supported a student this year and are looking into associated tax credits, a tax professional can help. Contact Taxation Solutions, Inc. for advice and assistance with all of your tax needs in Memphis. We are more than happy to help you figure out your taxes!