Your Taxes: Tax Credit for Education


    There is a source of support that is available to the lessen the cost of higher education for taxpayers.  Your 2014 (this year) and 2015 (next year) tax return will determine if you qualify for college tax credits.  The sooner it is filed, the faster it can be claimed.  This is true for students filing on their own, parents claiming degree-seeking children as dependents, or even the spouse of a student.  In our blog for this week and next, we will examine the qualifications of the 2 major education Tax Credits and what they mean.  This week we will look at the American Opportunity Tax Credit.

    This Tax Credit offers a maximum yearly amount of $2,500 per student.  More than one student can be claimed on a tax return for this credit.  Its goal is to help pay for qualified education expenses, such as, school tuition and other related fees.  Room and board is not covered.  One benefit of the American Opportunity Tax Credit is that up to 40% of it is refundable.  This means that individuals who owe no taxes can receive up to $1,000 for each student.  Now this credit is only available for 4 years per student.  It's only an option if the student has not finished the first 4 years of higher education before the end of the tax year.

    Your income plays a large part in qualifying for this credit.  A single person with an adjusted gross income of less than $80,000 will receive the full credit.  The credit is reduced as the adjusted gross income increases to $90,000 after that it disappears.  The limits are doubled for married couples filing a joint return.  There is another education Tax Credit, and most often, taxpayers will qualify for both but can only choose one.  In our next, blog we will examine the details of the other.  The government is trying to support the efforts of those who are seeking to continue their formal education past high school.  What do you think of this support?



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