7/22/2021
As a new school year approaches, you may be considering what classes you need to take and how much they will. Higher education is expensive, whether it's community college, a trade school, a four-year university or an advanced degree.
The good news is that tax credits can help to offset these costs by reducing the amount of tax you owe. There are two credits available to help you save money on higher education: the American Opportunity Tax Credit and the Lifetime Learning Credit. If you, your spouse or your dependents take post-high school coursework, you may be eligible for these tax benefits. If the credit reduces the tax to less than zero, you could even receive a refund. If you pay for higher education in 2021, you can see these tax savings when filing your tax return next year. You use Form 8863, Education Credits, to claim the credits.
Here are some important things to know about these credits.
The American Opportunity Tax Credit:
Worth a maximum benefit of up to $2,500 per eligible student.
Only for the first four years at an eligible college or vocational school.
For students pursuing a degree or other recognized education credential.
Partially refundable; you could get up to $1,000 back.
The Lifetime Learning Credit:
Worth a maximum benefit of up to $2,000 per tax return, per year, no matter how many students qualify.
Available for all years of post-secondary education and for courses to acquire or improve job skills.
Available for an unlimited number of tax years.
To be eligible to claim either of these credits, you or a dependent must have received a Form 1098-T from an eligible educational institution. There are exceptions for some students. You can use the Interactive Tax Assistant tool to find out if you're eligible for these credits.
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