Jan 18, 2017 10:36 AM EST
How To Cut Down Your College Expenses Through The Educational Tax Breaks [Video]
It is costly to attend college, regardless whether you are enrolling as a freshman or as a returning student. There are tax laws that can provide you with various educational tax breaks. There are three main tax laws that can help reduce your tax bill. You just need to evaluate which best fits your situation as you cannot utilize more than one choice in any given year. The following are the three education tax breaks that can help you choose which one to use.
The American Opportunity Tax Credit
This tax educational break is most beneficial for most taxpayers, according to a report in Madison. This is targeted at college students in the undergraduate level. An eligible student can obtain up to four years of post-secondary education. The IRA states that you can obtain a maximum annual credit of $2,500 per qualified student. You can have a refund of a maximum of 40 percent of the remaining amount of the credit if your credit brings you a tax amount of zero. Grounds for disqualification involve individuals who have completed four years of college of other post-secondary education.
Lifetime Learning Credit
The Lifetime Learning Credit is the second educational tax break available for Americans. It covers college students include post-baccalaureate students and those who desire to obtain further training. You can take advantage of Lifetime Learning Credit as you are not required to have a minimum course load or be part of a degree program. Further, an American can claim this in an unlimited number of years. The maximum amount of $2,000 can be claimed in the Lifetime Learning Credit.
The Tuition and Fees Deduction
Americans who do not want to choose the two credits above can opt for the Tuition and Fees Deduction as a tax break. Its provision permits taxpayers with modified AGI of $65,000 or less for singles or $130,000 or less for joint filers to have a maximum deduction of $4,000.
Choose The Best Option
You can have one of the three tax credits to choose from. You can opt for the American Opportunity Tax Credit as it has the most advantage. This is followed by the Lifetime Learning Credit and then the Tuition and Fees Deduction. Your choice can help you cut your tax bill.
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