Which education tax credit is best

Know what dependents credits and deductions you can claim Get started. Know what tax documents you'll need upfront Get started. Learn what education credits and deductions you qualify for and claim them on your tax return Get started. The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice.

Skip To Main Content. May be used toward required course materials books, supplies and equipment as well as tuition and fees. May be applied against four years of higher education instead of just two years under the previous Hope Credit. Most parents will come out ahead with the more generous American Opportunity Credit. The interest exclusion from income is not available for taxpayers filing as married filing separately. Interest on earnings in other plans you can use to save for college, including Coverdell Savings Accounts and Education Savings Plans, is not taxable if you use the money to pay for higher education expenses.

If the college expenses you pay in a particular year exceed the amount available from one of these plans, you are allowed to claim a credit for the excess amount. Not sure which credits to take? All you need to know is yourself Just answer simple questions about your life, and TurboTax Free Edition will take care of the rest.

Like the American Opportunity credit, the Lifetime Learning credit is phased out if your modified adjusted gross income MAGI exceeds certain much lower levels. The rules for these credits can be tricky—especially when it comes to handling the refundable portion of the American Opportunity credit.

TurboTax will show you which education credits will get you the best tax advantage, do all the calculations and complete all the forms for you.

Just answer some simple questions and let TurboTax take care of the rest. Remember, with TurboTax , we'll ask you simple questions about your life and help you fill out all the right tax forms. Whether you have a simple or complex tax situation, we've got you covered.

Feel confident doing your own taxes. Just answer simple questions about your life, and TurboTax Free Edition will take care of the rest. For Simple Tax Returns Only. The Lowdown on Education Tax Breaks. What are Education Tax Credits? Deduction for Higher Education. Estimate your tax refund and where you stand Get started. See if you qualify for a third stimulus check and how much you can expect Get started. Easily calculate your tax rate to make smart financial decisions Get started.

Estimate your self-employment tax and eliminate any surprises Get started. Know what dependents credits and deductions you can claim Get started. Know what tax documents you'll need upfront Get started. The lifetime learning credit has broader eligibility requirements than the AOTC, as it is intended for taxpayers at all education levels.

The lifetime learning credit can be used for a wide range of schools, including vocational training or professional degree courses, as well as for tuition at more traditional four-year undergraduate and graduate schools.

To be eligible for the lifetime learning credit, a student must be enrolled in a course to earn education credits or improve job skills at an eligible educational institution for at least one academic period, as determined by the school. The student will receive a Form T, Tuition Statement, from the education institution if it is an eligible school as defined by the IRS. There are income limits for claiming the lifetime learning credit.

The lifetime learning credit is not refundable. This means that the credit can reduce your tax liability to zero, but it cannot be refunded to you beyond that point. Critics of subsidies for higher education have long argued that education tax credits are one reason that the cost of higher education has been rising many times faster than inflation.

According to these critics, education tax credits simply raise the overall cost of college without an actual increase in access to it. Tax credits make more money available for spending on education, but they do nothing to increase the supply or quality of schooling.

Both credits cannot be claimed in the same tax year for the same student. The AOTC can only be used for undergraduate expenses, while the lifetime learning credit is more flexible.

The AOTC can only be claimed for four tax years; the lifetime learning credit can be claimed an unlimited number of times. The AOTC requires the student to be enrolled at least half time for an academic period, while the lifetime learning credit is available to students enrolled in at least one course for an academic period. Students cannot have a felony drug conviction and claim the AOTC. This is not a requirement for the lifetime learning credit. Yes, your vocational school may count as an eligible educational institution for the lifetime learning credit.

If your school is eligible, you will receive a Form T from your school in the mail before you file your taxes. If you do not receive a Form T, contact your school. Similarly, if you believe that the amount listed on your T is incorrect, contact your school. Internal Revenue Service. Income Tax. Saving For College.

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