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Education tax credits comparison table

The price of college keeps going up, but two tax breaks, the American Opportunity credit and the Lifetime Learning credit, can help students and/or their parents defray some education expenses. As the names indicate, these educational assistance options are credits rather than deductions; they can reduce your tax bill dollar-for-dollar and, in some cases, get you a refund if you don’t owe the IRS. The American Opportunity credit replaces the Hope credit, providing up to $2,500 in tax and education savings, with a possible $1,000 as a refund. It’s limited to costs incurred in the first four years of university and expires at the end of 2012 unless Congress extends it. The Lifetime Learning credit, as its name indicates, covers costs beyond the undergraduate level. It’s worth a possible $2,000 credit. Do your homework to see if you qualify for either credit. If you do, you could earn a great tax-saving grade.

It would be helpful to put the high points of the American Opportunity and Lifetime Learning credits in a table format.

American Opportunity Lifetime Learning
Up to $2,500 credit per student; 40 percent of credit may be refundable (limited to $1,000). Prior Hope Credit claims must be taken into account when figuring eligible expenses. Up to $2,000 credit per tax return.
Covers course-related books, supplies and equipment for first four years of a student’s undergraduate studies. Available for all years of postsecondary education, both undergraduate and graduate, as well as for courses to acquire or improve job skills. A degree or certification is not required.
To claim, student must be enrolled at least half-time in a program that will lead to a degree, certificate or other recognized education credential at a an eligible institution. Available for one or more courses, with no long-term enrollment conditions.
Credit is phased out for modified adjusted gross incomes between $80,000 and $90,000 for single filers, $160,000 and $180,000 for joint returns. Credit is phased out for modified adjusted gross incomes between $50,000 and $60,000 for single filers, $100,000 and $120,000 for joint returns.
Is not available if student has a felony drug conviction on his or her record. Is available even if student has a felony drug conviction on his or her record.

If you, or a child, is in college or you’re continuing your own education, check out these tax credits that could help you pay some of the high costs of higher education. Your tax homework could pay off on your 1040, as well as on your college transcript.

Ability to get financial aid for college from the US government is one of the reasons why expats should always file their US taxes. We also cover other reasons to file US taxes if you live abroad. We also wrote a detailed article on how expats can apply for Fafsa for foreign universities.