Going back to school isn’t just for kids. In today’s world it’s more important than ever to continually upgrade our skills, and sometimes acquire new skills or change career direction.
Going back to school is not cheap, but did you know there are some tax credits available to help ease the pain? Some of the costs you pay for higher education for yourself, spouse, or a dependent heading off to college can save you money at tax time.
There are two types of higher education tax credits:
American Opportunity Tax Credit. This credit can be up to $2,500 annually for an eligible student. This credit applies for the first four years of higher education. Forty percent of the credit is refundable, which means you may be able to get up to $1,000 of the credit as a refund, even if you don’t owe any taxes.
Lifetime Learning Credit. With this credit you may be able to claim a tax credit of up to $2,000 on your federal tax return. There is no limit on the number of years you can claim this credit for an eligible student.
Only one type of education credit can be taken each year, but if there is more than one person on the return that is eligible you can claim a different credit for each student. Example: Spouse who qualifies can take the Lifetime Learning Credit and a qualifying dependent can take the American Opportunity Tax Credit, or vise versa.
Qualifying expenses include tuition, fees and other related expenses such as books. Most colleges and universities qualify as eligible educational institutions. Vocational schools or other postsecondary schools may also qualify.
For more information on school tax credits visit the IRS website at www.irs.gov and type in Education Credits in the search box.