College students may apply for tax advantages. There is the education credit, American Opportunity Credit and Lifetime Learning Credit, and the Tuition and Fees Deduction.
“If eligible, one of these credits or deductions can be claimed per student,” DeKalb CPA Grant Cooper said.
Either parents or students can take the two credits and one deduction, Cooper said. Usually, the parents take the tax advantage.
“The education credit is refundable, so part of it one gets back even if there is no tax liability. You only get to use one,” Cooper said. “In addition, all three phase out with income levels. So higher income levels would null the advantage. These credits are not understood and frequently missed.”
The college student must be 24 or older, or parents must pay at least half of their support that year. Income levels are considered. If the student does not meet criteria, parents may use the tax advantage.
The American Opportunity Credit can be claimed for four tax years and used for the first four years of undergraduate studies.
The student has to be enrolled at least half-time in a degree program. This credit also has a portion that can be refundable to the person claiming it.
The Lifetime Learning Credit is a non-refundable tax credit that can be used by undergraduate and graduate students. These two tax credits are generally more beneficial than using the Tuition and Fees Deduction. The Tuition and Fees Deduction can also be used by undergraduates and graduate students, but cannot be used in the same year as either of the education credits.
Qualifying expenses include tuition, enrollment fees, course-related books, supplies and equipment. Room and board or personal expenses cannot be used as deductions. These are general situations and there may be additional rules.