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?
During 2009 to 2017, 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 Credit.
What College Costs Qualify?
Qualified expenses include tuition and required fees, minus any
grants and scholarships that are received tax-free. Expenses for
books and supplies are not included unless they must be paid to the
institution as a condition of enrollment. The costs of room and
board, insurance, transportation and medical fees (including health
fees) are not qualified expenses, even if required for