If you're paying for your or your dependent's college education,
there are two tax credits available for you - American Opportunity
Tax Credit and Lifetime Learning Credit. For more information on
these programs and more, visit the Internal Revenue Service's
website at www.irs.gov and check out Publication 970
Tax Benefits for Education.
What's a Tax Credit?
A tax credit is better than a deduction. A credit is subtracted
directly from your federal income tax on a dollar-for-dollar basis.
This saves you more money than a deduction, which you subtract from
your income before you calculate your tax and which yields much
less than dollar-for-dollar savings.
Who Gets to Claim the Credit?
If someone claims the student as a dependent for tax purposes,
that person, not the student, may receive the tax credit, even if
the student files a tax return. Otherwise, only the student may
receive the credit.
What's the Difference Between the Credits?
The American Opportunity Credit can be claimed for each of the
first four years of college or career technology school for classes
that lead to a degree or recognized certificate. The student must
be enrolled at least half-time to qualify for the American
Opportunity Credit. The Lifetime Learning Credit is available for
any postsecondary education, including graduate and professional
school, and unlike the American Opportunity Credit, there is no
minimum enrollment. If you qualify for both credits, it will
usually be to your advantage to claim the American Opportunity
What College Costs Qualify?
Qualified expenses include tuition and required fees, minus any
grants and scholarships that are received tax-free. The costs of
room and board, insurance, transportation and medical fees
(including health fees) are not qualified expenses, even if
required for enrollment. For the Lifetime Learning Credit, expenses
for books and supplies are not included unless they must be paid to
the institution as a condition of enrollment.