There are many ways to tap into assistance when trying to fund your child’s college education. Students can apply for scholarships, student loans, work study programs, and financial aid assistance.
Something to check into if you are seeking funds to help pay for your child’s college education are tax credits that apply under certain circumstances.
American Opportunity Credit – A Partially Refundable Tax Credit
* Information for each specific tax year should be obtained from the IRS website. It is not certain how long this credit will be in effect. Currently, it is specific to 2009 and 2010 and may be extended on a year by year basis.
* Taxpayers (families or students) with no tax liability are eligible for the credit.
* Currently, this credit is not available to foreign students in the U.S. on an F-1 visa.
* The student or family can claim the credit for the first four years of post secondary education per eligible student.
* The AO Credit increases the Hope Scholarship Credit to 100% of tuition, fees, and class materials up to $2,000 during the taxable year. An additional 25% of the next $2,000 in expenses may also qualify, with a credit cap of $2,500 max.
* Taxpayers with an adjusted gross income on their return of $80,000 ($160,000 joint) or less are eligible. The credit is reduced for those whose AGI exceeds these amounts. Taxpayers with AGI of more than $90,000 ($180,000 joint) are ineligible.
* Unlike the Lifetime Learning Tax Credit discussed below, the AO Credit is based on the number of qualifying students in the family; the credit is not limited per household or tax return.
Lifetime Learning Tax Credit – Per Household College Assistance
For those with a tax liability, there is the lifetime learning tax credit.
* A family is eligible to claim up to 20% of $10,000 to cover eligible costs for qualified students.
* Eligible students can include the taxpayer, their spouse, and eligible dependents.
* There is no limit on the number of years the Lifetime Learning Tax Credit is available to eligible candidates.
* The credit amount is $2,000 and is per family or tax return, not per student.
* The income limitations for the Lifetime Credit are different than those for the American Opportunity Credit and geared more toward low to moderate income households.
More information and eligibility requirements are available on both of these tax credits by visiting the Internal Revenue Service website.