You may qualify for two key education credits that can help off-set the cost of post-secondary education for you, your spouse or a dependent: Hope Scholarship Credit/American Opportunity Tax Credit and the Lifetime Learning Credit. Please note that for tax years 2009 – 2012, the Hope Scholarship Credit is renamed the American Opportunity Tax Credit and the amount of the credit has been increased.
While you may qualify for both credits, you cannot claim both the American Opportunity Tax Credit and Lifetime Learning credits for the same student in the same year. Both credit amounts are determined based on your gross income and your filing status. Furthermore, you cannot claim either credit if you are married filing a separate return or claimed as a dependent on someone else’s return.
Hope Scholarship Credit/American Opportunity Tax Credit
For tax years 2009 – 2012, eligible students can claim up to $2,500 of tuition and related expenses through the Hope Scholarship Credit/American Opportunity Tax Credit. The credit applies for the first four years of post-secondary education, such as college or vocational school, for qualifying students. If the credit is more than your tax liability, the amount of the credit that is more than your tax liability is refundable to you, up to a maximum refund of 40 percent of the total credit.
The credit was extended to apply for tax years 2011 and 2012 by the Tax Relief and Job Creation Act of 2010. The new credit makes the Hope Credit available to a broader range of taxpayers, including many with higher incomes and those who owe no tax.
Lifetime Learning Credit
The Lifetime Learning Credit equals 20 percent of the first $10,000 of tuition and related expenses paid during the year, for a maximum credit of $2,000 per tax return. The credit applies regardless of the number of years the student is in the program.
Visit www.irs.gov for additional information.