- As of 2011, a tax deduction of up to $4,000 a year for up to four years is allowed to tax payers for tuition and related expenses (but not room and board) for themselves, their spouse or their children at post-secondary educational institutions. The deduction is available to single filers making up to $65,000 in modified adjusted gross income and $130,000 for married filers.
- As of 2011 and at least through 2010, the American Opportunity Tax Credit allows tax filers a tax credit of up to $2,500 for tuition, books and related expenses (but not room and board) at qualified post-secondary institutions for up to four years. This tax credit is also available as a refund up to $1,000 if your tax liability is less than $2,500. Taxpayers with modified adjusted gross incomes of up to $80,000 if filing as a single or $160,000 if filing as a couple are eligible.
- The lifetime learning tax credit offers a credit of up to 20 percent of post-secondary education up to $10,000 in expenses, for a total credit of $2,000 annually. Unlike the college deduction and American Opportunity Tax Credit, it is available for part-time students, even those taking only one course, and is available beyond four years of college. Taxpayers with modified adjusted gross incomes of up to $60,000 if filing as a single or $120,000 if filing as a couple are eligible.
- Tax payers may only take one tax credit or the deduction. In deciding which to take, it is important to understand the distinction between deductions and credits. A tax deduction is an expense that is subtracted from your taxable income. Its value depends on your tax bracket -- the higher your tax bracket, the higher the value of the tax deduction. Unlike a deduction, a tax credit is subtracted directly from taxes owed.
Basic College Tax Deduction
American Opportunity Tax Credit
Lifetime Learning Tax Credit
Which to Take?
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