Tax credits help with higher education
If you meet Internal Revenue Service guidelines, you can count $10,000 of your education expenses. If you have a child also going to college and that child has eligible expenses, you can count those toward the $10,000 total, too, since the credit can be applied to all qualified education expenses in a taxpayer's family.
These costs, however, don't translate directly to your tax break. Rather, you get to claim up to 20 percent of your eligible lifetime learning expenses, which could net you a maximum $2,000 credit.
You can claim the lifetime learning credit in full for the 2012 tax year if your modified adjusted gross income is less than $52,000 and you are a single filer or if it is $104,000 and you file a joint return with your spouse. The credit amount will be reduced if you make between $52,000 and $62,000 as a single taxpayer or between $104,000 and $124,000 as a married couple filing jointly.
To qualify for the credits, you must pay postsecondary tuition and fees for yourself, your spouse or your dependent. The credit may be claimed by the parent or the student, but not by both. If the student was claimed as a dependent, he or she cannot file for the credit.
You also cannot claim credits for a student named as a dependent on your tax return if you already used the tuition and fees adjustment for that same student. But you can claim the credits even if you received a distribution from a Coverdell Education Savings Account or a qualified tuition program. Just make sure you don't use Coverdell or tuition account money to pay for the expenses you use to claim an education credit.
If a student meets the requirements for the American opportunity credit and the lifetime learning credit, you must pick which to claim. You cannot take both for the same student in the same year.
However, if you have multiple kids in college, you can choose to take the American opportunity credit and the lifetime learning credit on a per-student, per-year basis. This means that, for example, you can claim the American opportunity credit for your daughter and the lifetime learning credit for your son on the same tax return.