College Tax Breaks

As tax season approaches, it would be good to look at the two most common college tax breaks available to eligible families.

HOPE/American Opportunity Tax Credit

As part of the American Recovery and Reinvestment Act (ARRA) of 2009, the American Opportunity Tax Credit is an expansion of the HOPE Tax Credit.

The American Opportunity Credit provides college tax breaks of up to $2,500. These are for students who pay at least $4,000 for tuition and other qualified school expenses, like textbooks, course materials and relevant fees. If the tax credits exceed your liabilities, you’ll be given a refund of up to $1,000 more than your tax bill. Moreover, the American Opportunity Tax Credit covers four years of college rather than just the first two academic years.
These expanded terms apply for the 2009 and 2010 tax years.

Other general requirements:

• A student must be enrolled at least half-time
• Income limit is set at $90,000 for single taxpayers, and up to $180,000 for married taxpayers filing jointly

The Lifetime Learning Tax Credit

The Lifetime Learning Tax Credit is available for all post-secondary academic years and courses that improve job skills. This tax credit only applies to tuition and fees.

Under the Lifetime Learning Tax Credit, taxpayers can claim a tax credit of 20%, up to $10,000 worth of any combination of tuition and fees.

The income limit is set at $60,000 for single tax payers and $120,000 for married taxpayers filing jointly.

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