- The American Opportunity Credit is available to those individuals in their first four years of postsecondary education. Taxpayers with a filing status of married filing jointly and an adjusted gross income of over $180,000 or single, head of household or qualifying widower making over $90,000 are not eligible. A maximum of $2,500 may be used as a credit for each eligible student, and the purchase of books or other expenses is not required. The tuition costs must be for the taxpayer, the spouse of the taxpayer or a dependent claimed as an exemption on an income tax return.
- Taxpayers may take advantage of the Lifetime Learning Credit for qualifying courses at the undergraduate, graduate or professional level. Taxpayer modified adjusted gross income must be under $50,000 for individuals and $100,000 if married filing jointly to claim the full credit. The credit cannot be claimed for those married filing separately. The credit is 20 percent of the first $10,000 in tuition expenses paid for eligible students, capped at $2,000. The credit is reduced if modified adjusted gross income is between $50,000 and $60,000 for individuals and between $100,000 and $120,000 for joint filers. Taxpayers may take the American Opportunity Credit or the Lifetime Learning Credit.
- Taxpayers taking courses required by their employer or for job skills improvement may be able to deduct tuition or education-related educational expenses on their tax returns. The courses or education cannot be for a new career or business or to meet the entry-level requirements of a current career or business. Expenses may also be deductible for a temporary sabbatical while pursuing an education program but the taxpayer may only be absent temporarily and must return to the same area of work. Eligible expenses for deduction include tuition, books, laboratory supplies and certain travel expenses. Talk with a tax professional for questions regarding specific expenses for deduction.
- Some individuals receive student loans to help pay for tuition and education expenses. Taxpayers utilizing student loans may be able to deduct interest on those loans after education is complete and loan repayment begins. In order to take the student loan interest deduction a taxpayer must be individually required to pay the student loan interest, the taxpayer cannot be claimed by a dependent on another tax return, and the taxpayer modified adjusted gross income must be below a stated level announced annually by the Internal Revenue Service. This level was $150,000 for married filing jointly and $75,000 for all others in 2010.
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