Everyone agrees that the value of education is hard to determine. But there is a price- and taking courses is not cheap. Tuition and fees average out at around $18,000 for a year of college and if you go to a private school you’re looking at around 32 Grand! According to the National Center for Education Statistics, the cost of a college education went up 42% in the ten years between 2000 and 2010.
The American Opportunity Credit
It’s definitely expensive to go to college, but education is valuable. Therefore, the IRS offers an education tax credit. It’s called the American Opportunity Credit. Whether it’s you or your dependent attending college, you can get a tax credit worth up to $2,5oo per student. It may not pay all the bills, but it will help you out a bit. And education has a lifetime value: employers like an educated workforce and an education will help you get jobs.
The Lifetime Learning Credit
What if you’re not attending college in order to get a degree? What if you’re taking classes so you can get a better job? What if you’re taking a graduate class? Well the IRS also recognized the importance of lifetime learning, so therefore we have the Lifetime Learning Credit.
This education tax credit can be used anytime during your life when you are paying tuition to take a course at a qualified institution. You don’t have to be pursuing a degree, unlike with the American Opportunity Credit.
What are the Education Tax Credits Worth?
The Lifetime Learning Credit is worth less than the American Opportunity Credit, however. It’s worth only up to $2000 per year. Even if yo have multiple students, it’s not even worth $2000 per student, it’s $2000 total. However, you can claim it every single year if you’re taking qualified courses. The American Opportunity Credit is available only for four years, even if you or your child takes five years to finish college.
One last thing: if you make more than a certain amount of money per year the Lifetime Learning credit won’t be available to you. It’s phased out once you enter the $50,000 range- meaning it’s a smaller tax credit for people with a Modified Adjusted Gross Income (MAGI) of $50,000 to $60,000. Above that amount, you don’t get the tax credit at all.
The American Opportunity Credit’s phaseout range is $80,000 to $90,000 (unless you’re married filing jointly). Therefore, more taxpayers can uses this credit because the phaseout range is higher.
