Cost of higher education continues to rise while students are stuck fighting over scholarships and working minimum wage jobs. Seems like everything is stacked against you doesn’t it? Well luckily students may be in luck thanks to two tax credits available, the American Opportunity and Lifetime Learning credit.
The American Opportunity (A.O.) credit for qualified education expenses allow for the taxpayer to claim up to $2,500 per individual attending college. Credit is intended to help cover tuition, books, and materials. Room and board do not qualify for the credit. The credit is also limited to the first four years of higher education, so graduate students will likely not qualify unless they accelerated their undergraduate degrees.
The second credit is the Lifetime Learning credit which can help cover undergraduate costs for a student who is not eligible for the A.O. Lifetime Learning credit is in place for those students who have already used up all of their eligibility with the A.O. or are not currently able to qualify for the A.O.
Be warned though, students may not qualify for both credits at the same time, you either are able to take the American Opportunity or Lifetime Learning credit. In all likelihood, most students will aim to take the A.O. early and often, then as you approach potential graduate studies or less coursework you may target the Lifetime Learning credit. If you or a dependent are currently students and wondering if you eligible for the credits, contact us at the Center for Financial, Legal & Tax, Inc.