There are several great credits available to students who are in college pursuing higher education. These credits help reduce the burden of paying for an education. Depending upon your situation, the student or the parents may take advantage of these tax credits. However, there is some confusion around the issue of who gets to claim these credits. It’s important to know just who can get them, so you can plan ahead for next April’s tax bill.
What Tax Credits Are Available for Education?
First, let’s talk about the tax credits you might be entitled to claim on your tax return. The American Opportunity Credit is a modification of the pre-2008 Hope Credit and can provide up to $2,500 per year per student for the first four years of college. It is based on income; single taxpayers must make less than $80,000 per year to claim this credit, while married taxpayers must make less than $160,000 per year. The Lifetime Learning Credit provides up to $2,000 per student per year. Most students will apply for this credit once they have used up the four years of credit with the American Opportunity Credit. You can also deduct qualifying educational expenses on your taxes.
Who Can Take Advantage of These Tax Breaks?
If the student is still listed as a dependent, the parents can claim the credit. If the student is living on their own and are supporting themselves, they can claim it. If the student does not make enough income to be required to pay income taxes, the parents generally get to take the credits. If the student still lives at home but pays the majority of their own living expenses and has quite a bit of income, they can take the credits. If there is a question as to which party can take the credits, it is a good idea to give them to the student to help them make their budget stretch further. You may have specific circumstances that change this.
The IRS has information on the credits and deductions that parents and students may be entitled to claim on their taxes. It is important to keep detailed records of any income that you have, and every penny you spend toward your education or the education of your child. This will help you take the maximum deductions possible, and have supporting documentation if there are ever any questions on your tax returns.
With a free Taxbrain account, you can get all the free technical support you need when preparing your taxes. Our tax experts have years of experience, and access to the latest information on tax laws and issues. Let Taxbrain help guide you through the process so you can get the best tax breaks for your situation.