College Tax Credits

There are currently three college-related Tax credits and one deduction:

The American Opportunity Tax Credit (AOTC) – $2,500 per eligible child

The Lifetime Learning Credit – $2,000 per eligible child

The Hope Scholarship – $1,800 per eligible child

The Tuition and Fees Deduction

You may use only one credit per eligible student per year.

The AOTC, the latest credit, was pushed through Congress by President Obama as part of the 2009 stimulus package. It was intended to expand the coverage of the Hope Scholarship and those eligible to receive it. However, there are income limitations. Credit phase-out is between $160 and $180 thousand Adjusted Gross Income; $80 to $90 thousand for single taxpayers.

It is based on qualified higher education expenses, as defined in IRS Publication 970, paid on behalf of the taxpayer, their spouse or a dependent at an eligible institution. An eligible institution is any college, university, vocational school, or other post-secondary educational institution eligible to participate in a student aid program administered by the US Department of Education. Qualified expenses exclude any amounts paid for by withdrawals from a 529 College Savings plan.

It is important to discuss this with your tax professional.


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