For those paying for their education, there are a few tax credits that can help decrease the amount owed. The American Opportunity Credit and the Lifetime Learning Credit are available to those responsible for education expenses, such as tuition, fees, textbooks, supplies, and equipment.
Taxpayers can receive a dollar for dollar benefit of up to $2,500 for each student who meets the qualifying criteria. In order to be eligible, the student must be enrolled at least half-time for a minimum of one academic semester through the tax year.
The American Opportunity Credit allows even those who don't owe taxes to receive a refund of up to $1,000 since 40% of the credit is refundable.
Each eligible student can receive up to $2,000 each year with the Lifetime Learning Credit. Unlike the American Opportunity Credit, this benefits isn't limited by degree or student status, meaning part-time graduate students can still take advantage of this credit. However, all taxpayers who claim the Lifetime Learning Credit must have paid taxes for the year. There is no refundable portion of the credit for those who didn't owe taxes.
These tax breaks aren't available to taxpayers who paid for educational expense with grants, fellowships or scholarships. There are income restrictions for both credits, and the person claiming either credit cannot be listed as a dependent on anyone else's tax return.
Furthering your education can get pricey, but thankfully these tax breaks can help make it a little bit easier on your pocket come tax time.