What Tax Credits Exist for College Expenses?
The American Opportunity Credit is a partially refundable tax credit that provides up to $2,500 for tuition, fees and supplies paid during the year. The Hope Credit, replaced by the American Opportunity Credit for most taxpayers, still exists for taxpayers with a student attending school in a Midwestern disaster area and only allows a credit for tuition and fees. The Hope Credit is limited to $1,800 per student. The Lifetime Learning Credit also provides up to $2,000 of tax credit for tuition and fees and applies to degree programs and job skill courses. Taxpayers can only claim one tax credit per student. What Is the Tuition and Fees Deduction? The Tuition and Fees Deduction reduces taxable income for taxpayers. While a tax credit reduces the tax liability directly, a tax deduction only reduces the income by which the tax liability is calculated. This deduction does not apply if college expenses are paid through scholarships or employer reimbursement programs.
