By Robert W. Bianchi
Two education tax credits first became available in 1998.
Unfortunately, due to the complexity of the education tax credit
provisions, many of these credits are still going unused. The
education credits are intended to help families struggling to cope
with the increasing costs of college and higher education. However,
tax breaks only benefit those who take advantage of them.
Two education tax credits first became available in 1998. Unfortunately, due to the complexity of the education tax credit provisions, many of these credits are still going unused. The education credits are intended to help families struggling to cope with the increasing costs of college and higher education. However, tax breaks only benefit those who take advantage of them.
Here is a recap of the main provisions of these credits.
Hope credit: For the first two years of college, this provision allows a tax credit of up to $1,650 per student, per year. The credit is computed as 100 percent of the first $1,100 in qualified tuition and fees, and 50 percent of the next $1,100. The credit can be claimed for expenses for yourself, your spouse, and your dependents. The student must be enrolled in an accredited school at least half-time for one academic period during the year.
Lifetime learning credit: This credit of up to $2,000 per year, per family can be taken for all years of post-secondary education without limitation on the number of years. The credit is computed at 20 percent of qualified tuition and related expenses incurred for the year. Courses to acquire or improve job skills also qualify for the credit.
However, you need to be aware of the following two limits that apply to these education tax credits:
n To get the full credit, your adjusted gross income (AGI) must be under $90,000 ($45,000 for singles). If your AGI is higher, you get a partial credit until your AGI reaches $110,000 ($55,000 for singles).
n The Hope credit and lifetime learning credit may not be taken for the same student in the same year. Also, the credits cannot be claimed for the same expenses for which another tax benefit is received.
