Student Loan Interest & Tuition and Fees Deductions
The US tax code provides several incentives for higher education expenses. Incentives are provided in the form of credits or deductions. Credits reduce the amount of income tax you must pay. Deductions reduce the amount of income upon which you are taxed. You may not claim both a deduction and a tax credit for the same expense payments.
American Opportunity & Lifetime Learning Credits
The American Opportunity Credit is a credit of up to $2,500 for adjusted qualified education expenses paid for each student that qualifies. This credit is available only if the student has not yet completed the first four years of postsecondary education and is enrolled at least half-time in a degree-seeking program. The American Opportunity Credit is available a maximum of 4 years for any eligible student, but multiple credits can be used in a single year if more than one student qualifies.
The Lifetime Learning Credit is a credit of up to $2,000 for qualified education expenses paid for all eligible students; in other words, only one credit is allowed per tax return, even if there are multiple students claimed on the return. (more…)
