The cost of high education keeps rising. If you, or a dependent, are in college, make sure you take advantage of the tax breaks you might be eligible for. The neat thing here is that you can take the credit or deduction with the best tax benefit for you. So hand your CPA that 1098-T tuition statement and make sure he or she chooses the right one for your situation!
American Opportunities Credit (AOTC)
The AOTC (formerly the Hope Credit) is available for the first four years of college when a student pursues a degree. Eligible students can get up to $2,500 annually. To be eligible, the student must be enrolled at least half time, have not claimed the AOTC or the Hope Credit for more than four years, and not have a felony drug conviction.
The bad news- the AOTC might be limited depending on your income. If your income is over $90,000 for single or $180,000 for married filing jointly, you cannot claim the credit.
Lifetime Learning Credit (LLC)
The LLC is available for an unlimited number of years for undergraduate, graduate, and professional degree courses. The credit is worth up to $2,000 per tax return. Claim the LLC if the student is still in school after the AOTC has run out.
The bad news- the LLC might be limited depending on your income. If your income is over $62,000 for single or $124,000 for married filing jointly, you cannot claim the credit.
Tuition and Fees Deduction
The tuition and fees deduction works a little differently than the AOTC and LLC. The deduction reduces your income by up to $4,000 without requiring you to itemize your deductions. This can be helpful if you are not eligible for the tax credits above.
The bad news- the deduction might be limited depending on your income. If your income is over $80,000 for single or $160,000 for married filing jointly, you cannot claim the credit. Married filing separately filers cannot claim the deduction.