My Boarding School Blog

For families who have children going to college there is some hope in saving up for a college diploma. Parents can make use of federal government tax credit programs. Tax credit is an amount that can be deducted to your taxes to save up for any of your dependent’s college needs. If the student pays for college he can apply for tax credit to be subtracted to his future taxes. There are generally three tax credit programs with different rules and conditions that apply. Only one claim for a student every year can be approved.

Hope Credit – also known as the American Opportunity Tax Credit makes it possible for parents to claim 100% tax credit for a dependent child’s tuition and fees for a maximum of $2,500 yearly for every child. Incomes between $80,000 and $90,000 or $160,000 and $180,000 for married taxpayers are disqualified from the tax credit and cannot be received in more than 4 years for any student. Students should be in their first two years of post secondary education and enrolled in a program that leads to an undergraduate degree.

Life Learning Credit – You cannot take this tax credit if you already have the Hope credit taken for a student in a given tax year. The only difference between the two is that the Life Learning Credit doesn’t need the student to be studying towards a degree and there is no limit on the number of years you may take the credit.

Requirements for both Hope Credit and Life Learning Credit are as follows (http://www.irs.gov/newsroom/article/0,,id=213044,00.html)

1. The individual pays for qualified expense of higher education.
2. The individual pays for an eligible student’s education expense.
3. The student is either the individual paying, spouse or other dependent in which name is stated in the individual’s exemption on tax return.

Deduction of tuition and fees

This is beneficial for those who cannot qualify for the lifetime learning credit because of high income. The same requirements itemized above apply. You may be disqualified to claim the tuition and fees deduction based on the following guidelines.

1. Filing status is married filing separately
2. Modified gross income is more than $80,000
3. Non resident aliens
4. An education credit is claimed by you or anybody else for expenses of a student which the expenses are were paid.

These are just some of the available tax incentives for higher education. This encourages students and parents to pursue enrollment in higher education for a better hope of a high paying job. For more information visit the IRS Tax Benefits Information Center.

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