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Education Tax Credits/Deductions

January 9, 2014

If you spent money on education in 2013, there are certain credits and deductions you can claim when filing returns this season to bring down your tax liability. Each education tax credit and deduction has specific qualifying factors that must be met in order to use them on your return. Here are some education tax credits and deductions that you can use when preparing taxes this tax season.

American Opportunity Tax Credit (AOTC)
This tax credit will be available until the year 2017. The refundable tax credit allows you to reduce the amount you spend on higher education by reducing your income tax. If you qualify for AOTC, you can get a maximum of $2,500 annual credit per student. Full credit is only available to individuals whose modified adjusted gross income is $80,000 or less. For those filing jointly, the limit is $160,000.

You can claim the credit for each year of the first four years of a student’s post secondary education. If you have already claimed AOTC four times for a student, you cannot claim it anymore. Also, if the student has already completed the first four years of post secondary education, you cannot claim AOTC. If you missed claiming AOTC or do not qualify, you can consider the Lifetime Learning Credit (LLC). Those who qualify for both AOTC and LLC can use only one of them at at time, not both.

Lifetime Learning Credit
The expenses you made on education can be deducted if they are qualifying expenses. Lifetime Learning Credit is a nonrefundable tax credit. It offers credit of up to $2,000 for qualified education expenses for each student. You can claim this credit for any number of years as long as you make qualified expenses on a student’s education.

The amount of credit you can claim depends on your income level and the amount of taxes you pay in th year for which you are claiming the credit.

Tuition and Fees Deduction
You can deduct up to $4,000 per student for qualified expenses on tuition and fees for higher education. You can claim this deduction for yourself, your spouse or your dependent(s). Married filing separately cannot claim this deduction. If somebody else is claiming the student as a dependent for an exemption, then also you cannot claim the deduction on your return.

Those who are not eligible for the AOTC and the Lifetime Learning Credit can use this tax deduction to save tax money.

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