Education credits and deductions can help lower your tax bill

The Hope Credit and the Lifetime Learning Credit may be used to help with the bite of the cost of higher education. It is available for expenses paid for every taxpayer, spouse and dependents.

These credits are based on qualified education expenses, including college or vocational school tuition and enrollment fees. Of course, the costs must be paid during the tax year and for higher income taxpayers, there are limits and reductions in the amounts available. You cannot take the credit for costs of room and board, insurance or personal living expenses.

The Hope Credit is available for the first two years of college or vocational school. The taxpayer is entitled to a credit of up to a $1,800 tax credit per student per year.

The Lifetime Learning Credit applies to undergraduate, graduate and professional degree courses, and is available in amounts up to $2,000 per tax return, with no limit to the number of years a taxpayer can take this credit.

As for deductions, you may be able to deduct up to $2,500 from your income per tax return for qualified Student Loan interest. The deduction is available to the taxpayer who pays the interest on the loan, not necessarily the student receiving the loan.

You are not allowed to claim the Hope Credit and the Lifetime Learning Credit for the same person in the same year. Since the credit amount is higher for the lifetime learning credit, it is generally the preferred credit. However, there are situations that dictate that in the two years the Hope Credit is available, it would be in a taxpayer’s interest to take the Hope Credit rather the Lifetime Learning Credit. In any event, you can claim the Student Interest Loan deduction and a credit in the same year.

For up-to-date tax information visit TurboTax Online. Their support section is loaded with informative and accurate articles and a Free Tax Calculator you can use to help lower your taxes.