If you want to find other options on how to save on student common expenses, check out the Education Tax Credits and how you may benefit from them. There are two types of this program, which provide greater tax savings as they reduce your bill on a dollar-for-dollar basis instead of a tuition deduction.
American Opportunity Credit
Each eligible student is allowed to claim up to $2,500 in tax for education expenses such as tuition, course-related books, and required supplies and equipment needed to attend an institution. You may also obtain a refund of up to $1,000 if the credit amount exceeds the amount of tax you owe.
To qualify for this program, the institution must be eligible to participate in the federal student aid program. This credit is only available for students in their first four years of college. Other required qualifications include those who are enrolled at least half-time for one academic term during the tax year and have no felony drug convictions.
Lifetime Learning Credit
This program is available to all taxpayers who attend at least one course during the year an institution becomes eligible to participate in the federal student aid program. The eligibility for this program is more relaxed compared to the first one since the student does not necessarily pursue a degree or have a certification.
A qualified student can get up to a $2,000 benefit, which also covers the tuition fees and the cost of required books and supplies, which should be directly purchased from the school. However, this credit is nonrefundable if it exceeds the tax bill for the year.
According to TurboTax, the first step of the application is to fill out Form 8863 and include it with your tax return. The form requires you to determine the appropriate credit amount based on your qualified school’s total expenses. In the event that you do not qualify to file a tax return, you are not allowed to claim as a dependent of another taxpayer. But the taxpayer is allowed to claim the credit on your behalf. You can also ask for assistance from tax professionals, such as TurboTax Live Full Service.