Tax season is officially underway at the Internal Revenue Service. This means income tax returns that account for your earnings in 2017 are due by Tuesday, April 17, 2018.
If you’re one of the millions of college students pursuing a degree to launch or advance your career, you may be eligible to claim a few tax benefits that can help you reduce your bill to Uncle Sam and keep more of your money.
Let’s explore three of these key IRS tax breaks for education.
1. American Opportunity Tax Credit
The American Opportunity Tax Credit is an IRS benefit available to college students themselves, those who claim students as dependents on their income tax returns, or even spouses of students.
This credit is Worth up to $2,500 per year for each eligible student, and it can only be claimed for a student’s first four years of attending either a postsecondary college or university or a vocational school. Eligible students must be seeking a formal college degree or other recognized education-related credential.
Keep in mind that the AOTC is partially refundable, which means you can claim up to $1,000 of the credit, even if you do not owe any tax.
Those who claim this credit cannot earn more than $80,000 as single filers or $160,000 for couples who file joint tax returns. The credit is phased out when modified adjusted gross income amounts reach these levels.
2. Lifetime Learning Credit
The Lifetime Learning Credit is worth up to $2,000 per tax return, per year. This is regardless of the number of students who qualify for it. So, if two parents have two or three dependents in college, they can only receive up to this $2,000 maximum value in total, not $2,000 per student.
The nice perk of the Lifetime Learning Credit is that it is available for all years in which a student is enrolled in a postsecondary educational institution, unlike the four-year limit to the AOTC. It also applies to expenses related to courses one takes to learn or improve upone skills within a particular trade.
Modified adjusted gross income limits for this credit are $65,000 for individual filers and $130,000 for joint filers.
Important notes about the American Opportunity Tax Credit and the Lifetime Learning Credit: