Many students are scared away from pursuing postsecondary education by the perception that they cannot afford it. It is important to know that the federal government is currently offering two different types of tax credits – The American Opportunity Credit and the Lifetime Learning Credit – that may help you to offset high education costs. Both of the available education tax credits pay for eligible expenses up to a given amount, including tuition, books and equipment or material fees.
The Lifetime Learning Credit is also good for up to $2,000 in credit each year, and covers not only degree-seeking students, but courses that are related to furthering one’s job opportunities. Unlike the American Opportunity Tax Credit, however, those who claim this credit are not eligible to receive a tax refund based on its use. In other words, you can only receive the maximum amount of tax that you owe.
Although many students do qualify for one of the two grants above, for those that do not, there is still the opportunity to take a tuition and fees deduction on your taxes. This can save you up to $4,000 in taxes. It is important to note that individuals may not claim both the tuition and fees tax deduction and either of the tax credits -the American Opportunity Tax Credit or the Lifetime Learning Credit – in the same tax year. It is, therefore, to your advantage, to consult with someone with knowledge in the area of tax law, or to conduct careful research on your own, to determine which of these options would be of the most benefit. The most important thing to remember is that there are numerous options to help students pay for postsecondary education. It just takes a little bit of legwork to find out where they are.