What are the tax credits and deductions relating to higher education?
There are two education tax credits–the Hope credit and the Lifetime Learning credit–that provide some relief to families in the midst of financing their children’s college education. There is also a federal income tax deduction for certain taxpayers who pay qualified higher education expenses, as well as a deduction for certain individuals who pay student loans. As a general rule, a tax credit is a dollar-for-dollar reduction against taxes owed, and it is therefore more valuable than a tax deduction of the same dollar amount. Hope credit The first tax credit is called the Hope credit. It’s worth a maximum $1,650 per student per year in tax savings for the first two years of your child’s post-secondary education. The credit is calculated as 100 percent of the first $1,100 of qualified tuition and related expenses, plus 50 percent of the next $1,100 of expenses. Tip: For tax years 2005 and 2006, the Gulf Opportunity Zone Act of 2005 doubles the Hope credit for students attending an el
