With school back in session, both parents and students are looking for ways to save money that can help lower the cost of education. One way taxpayers can save the most money on school expenses is by looking into tax credits that can help cut the cost in half. These credits assist those who want to get the most out of their savings by reducing the amount of tax someone owes on their tax return. A credit can also reduce a tax balance to less than zero, and taxpayers may even get a refund.
Taxpayers that pay for higher education will most likely see savings when they file their taxes next year. Optima Tax Relief reviews how taxpayers can find out if they’re eligible for certain education tax benefits.
There are two credits available to taxpayers that will help offset the costs of higher education. Qualifying taxpayers can use The American opportunity tax credit and the lifetime learning credit can reduce the amount of income tax owed. Taxpayers can utilize Form 8863, Education Credits, to claim the credits.
In order to qualify for the American opportunity tax credit or the lifetime learning credit, eligible taxpayers or a dependent must have received a Form 1098-T from an eligible educational institution.
The American opportunity tax credit is:
- Worth a maximum benefit up to $2,500 per eligible student.
- Only the first four years at an eligible educational institution will be allowed.
- Students pursuing a degree or other recognized education credential.
- Qualifying education expenses can be reimbursed up to $1,000.
The lifetime learning credit is:
- Worth a maximum benefit up to $2,000 per tax return.
- Available for all years of posts econdary education and for courses to help improve job skills.
- Available for an unlimited number of tax years.