Tax credits, deductions and savings plans can help taxpayers with their expenses for higher education. But what is a tuition tax credit? Let’s take a look.
An education credit helps with the cost of higher education by reducing the amount of tax owed on your tax return. If the credit reduces your tax to less than zero, you may get a refund.
There are two education credits available: the American Opportunity Tax Credit and the Lifetime Learning Credit.
The American opportunity credit is specifically for undergraduate college students. As a student, you can claim the credit on your taxes for a maximum of four years as long as no one else, like your parents, claims you as a dependent on their tax returns. Parents will claim the credit, instead of the student, if they paid for the student’s education expenses and have the student listed as a dependent on their return.
The college tuition itemized deduction is equal to the amount of your qualified college tuition expenses paid, up to a maximum deduction of $10,000 for each eligible student.