Published: Education Credits Help Lighten the Load - Blush Magazine, August 2012

by Becky Wooten, CPA

Entering or returning to college or other post-secondary education programs can facilitate opportunities for a lifetime of growth and satisfaction. To assist with the financial cost of education, students should seek and apply for grants, scholarships, stipends and awards. But even with the avalanche of costs associated with higher education, these programs may not cover all of the necessary expenses. Congress has implemented the following tax code credits that can aid those needing assistance to pay for education.

AMERICAN OPPORTUNITY CREDIT - To qualify for this credit, a student must be enrolled in a program that leads to a degree, certificate or other recognized educational credential and must take at least one-half of the normal full-time workload for his or her course of study for at least one academic period beginning during the tax year. The credit can only be claimed for the first four tax years of post-secondary education for anyone student. The American Opportunity Credit is 100 percent of the first $2,000 of eligible expenses and 25 percent of the next $2,000 of expenses; the maximum credit is $2,500 per student. This credit is per student, per year; therefore, a family may have more than one eligible student in a year.

LIFETIME LEARNING CREDIT - The lifetime learning credit is available for undergraduate, graduate and professional degree students, as well as students acquiring or improving their job skills. There is no limit on the number of years for which the credit can be claimed for each student. There is no course workload requirement; the credit is allowed regardless of the number of courses taken. The lifetime learning credit is a non-refundable tax credit of 20 percent of qualified tuition and fees paid during the year, up to a maximum of $10,000. The maximum credit is $2,000. The credit is per tax return, not per student. Thus, a family's maximum credit is the same, regardless of the number of students in the family.

Families with more than one student during the year can choose to take the credits on a per-student, per-year basis. For example, the American Opportunity Credit can be claimed for one student, and the Lifetime Learning Credit can be claimed for another in the same tax year. Both credits can make a sizeable difference when paying for ongoing edncation. For more details on the tax code credits) visit irs.gov.

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The contents and opinions contained in this article are for informational purposes only. The information is not intended to be a substitute for professional accounting counsel. Always seek the advice of your accountant or other financial planner with any questions you may have regarding your financial goals.