One of the benefits of having a child in college or going to college yourself is the tax savings. Of course, you will be spending thousands of dollars on college expenses, but at least the government has recognized that added financial burden and provided college-related tax breaks and credits to reduce your tax burden. has offered a brief explanation of the most common tax credits:

For 2011 you can deduct up to $4,000 of college tuition and fees paid for you, your spouse or any other person claimed as a dependent on your return. This is an “above-the-line” deduction, which means you don’t have to itemize in order to take advantage of the break. However, the $4,000 figure is the annual maximum, regardless of how many students may be in your family.

The article itself goes into more detail regarding the specific rules and exceptions, along with some other valuable information about 529 savings plans and deductions.

Lifetime Learning Tax Credit

The Lifetime Learning Credit is a tax credit for any person who takes college classes. It provides a tax credit towards college tuition and fees. You can claim the Lifetime Learning Credit on your tax return if you, your spouse, or your dependents are enrolled at an eligible educational institution and you were responsible for paying college expenses. Unlike the Hope Credit, which was generally replaced by the American Opportunity Credit, you need not be enrolled at least half-time. Even if you took only one class, you may take advantage of the Lifetime Learning Credit.

American Opportunity Credit

The American Opportunity Credit, passed by the Obama administration as part of the stimulus package, has increased the term and amounts of college tax credits. This act makes the college credits available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary years of education.

In addition, the ARRA (American Recovery and Reinvestment Act) adds computer technology to the list of college expenses that can be paid for by a qualified tuition program, commonly referred to as a 529 plan. The law expands the definition of qualified higher education expenses to include expenses for computer technology and equipment or internet access and related services to be used by the designed beneficiary of the 529 plan while enrolled at an eligible educational institution.

Getting additional help

The New York Times posted a five-part series in January of questions and answers related to education tax credits and tax breaks. The questions were fielded by Ellen D. Cook, the assistant vice president for academic affairs at the University of Louisiana at Lafayette, and head of the American Institute of Certified Public Accountants’ panel on individual income taxation. One of her areas of concentration there is education deductions and credits. Ms. Cook fielded all types of questions from deducting student loan interest, to the tax laws regarding tuition and fees, to claiming deductions after graduation as an independent taxpayer.

You can also visit the IRS website for more information regarding these new tax laws as they apply to parents of college students, independent college students, and graduate students.

Before you file your income taxes, do some reading or consult a tax professional so that you can get the maximum deduction allowed for college-related expenses. In order to facilitate the preparation of next year’s taxes and get the maximum credit available, keep track of all your college-related expenses by saving receipts and tuition bills. If you have questions about any of the expenses, consult a tax professional or the Internal Revenue Service.

Are these tax credits enough incentive and benefit to encourage you to attend college or go back to college?


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