Education tax credits: a guide.

All about the education tax credits and how to use them.

An education is one of the best things money can buy. It’s the money part, however, that can be discouraging. Thankfully, there are a handful of education tax credits that ease the pain of school-related expenses. From computers to books to continuing education, education tax credits help save students and their families save hundreds – even thousands – each year. 

Education tax credits 

Education tax credits apply to what the IRS calls qualified education expenses. These expenses are any dollar amounts spent on things like tuition, enrollment fees, activity fees, course materials. Basically, nearly any costs required for attendance at a qualified educational institution. 

Lifetime Learning Credit 

The Lifetime Learning Credit is an education tax credit that helps filers pay for undergrad, graduate, or continuing professional education. The credit, worth up to $2,000 per tax return, is extremely flexible. You don’t have to be working toward a degree, and there's no limit to the amount of years you can claim it. 

This tax credit is perfect for those who are looking to expand their options for work. People who have lost a job or need a pay increase can use this credit to their advantage as they broaden their skills and education. 

To claim the Lifetime Learning Credit, fill out form 8863 and include it when you file your taxes

American Opportunity Credit 

This education tax credit is mostly associated with a 4-year college degree. The American Opportunity Tax Credit has a wide variety of uses, including books and tech. You can claim this credit even for education expenses you didn’t directly pay to the school. 

The American Opportunity Credit maxes out at $2,500 per student. You must have at least $4,000 in expenses to qualify for that maximum deduction. It’s refundable, too – so if it brings your owed amount to zero, you could qualify for a refund of the remaining credit.

To claim the American Opportunity Credit, fill out form 8863 and include it when you file your taxes. 

Student Loan Interest Deduction 

The Student Loan Interest Deduction is, as the name suggests, for people who are paying down student debt. Student loans are the only cost that this deduction applies to – not supplies, tuition, or other expenses. 

Are there any education expenses that don’t qualify? 

The education tax credits account for a lot of school-related costs. There are limitations, though. These are expenses that don’t qualify for education tax credits. 

Even if you pay the following expenses to enroll or attend the school, the following are not qualified education expenses: 

  • Room and board 
  • Insurance 
  • Medical expenses (including student health fees) 
  • Transportation 
  • Similar personal, living or family expenses 

We know that education tax credits can be complicated. If anything is worth the extra effort, though, it’s the pursuit of an education. 

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