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Taking college courses can be a sizable investment. There are some credit opportunities that may be able the offset some of the cost. Taxpayers are only allowed to receive one of these credits for amounts paid for qualified education expenses in a given year. Qualified education expenses are also reduced in the credits calculation, by the amount of tax-free educational assistance received during the year.
The American Opportunity Tax Credit is a credit that reduces your taxes owed dollar for dollar, up to $2,500, for the cost of tuition, fees, and course materials paid during the tax year. You can claim the credit for four years of higher education expenses, and it is not limited to amounts you paid to the educational institution. The credit is phased out for single and married filing joint taxpayers starting at $90,000 and $180,000 respectively.
The Lifetime Learning Credit is a credit received for qualified tuition and related expenses paid for eligible students enrolled in an eligible educational institution. This credit can help pay for undergraduate, graduate, and professional degree courses. There is no limit on the number of years you can claim the credit, and it is worth up to $2,000 per tax return. The phase out for this credit starts at an adjusted gross income of $55,000 for single and $110,000 for married filing joint returns, and if your income is over $65,000 or $130,000, respectively, you receive no credit.
While not a credit, Tuition and Fees Deduction reduces taxable income up to $4,000 for tuition and fees required for enrollment at a qualified post-secondary educational institution. There is no limit to number of years you can claim this deduction. Phase out of deduction starts at $80,000 for single and $160,000 for married filing joint taxpayers.
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