Education doesn’t just make you smarter, it’s a smart way for you to save money on taxes. Taxpayers may be eligible for tax credits for expenses they pay for higher education for themselves and their dependent children.
The Hope scholarship credit is available to students during their first two years of post-secondary education. To qualify, the student must be enrolled at least half-time in a degree or certificate program for any portion of the year.
This credit can save you money, but it’s nonrefundable. That means it might reduce your tax to zero but that’s the limit.
The Hope credit is provided on a per-student basis. It applies only to tuition and fees, not to books, dormitory costs or other living expenses. And it’s phased out if you exceed certain earning limits.
Lifetime learning credit
The Lifetime learning credit lives up to its name. It covers college juniors, seniors, graduate students, adults returning to college. Students carrying less than half the usual course load also are eligible to claim this credit, so it could help you pay for costs if you’re only taking a couple of classes.
In fact, even if you’re long out of school, you can take this credit to help offset the cost of a non-college course you take that’s designed to help improve your job skills. Similar to the Hope credit, the Lifetime learning tax credit is available for tuition and required fees less grants, scholarships and other tax-free educational assistance.
The maximum credit is determined on a per-taxpayer (family) basis, regardless of the number of post-secondary students in the family, and is phased out at the same income levels as the Hope scholarship tax credit.
Families will be able to claim the Lifetime learning tax credit for some members of their family and the Hope Scholarship tax credit for others who qualify in the same year.