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Saving for College #2: Lifetime Learning Credit

September 27th

It can be incredibly disheartening to face paying today’s exorbitant college fees. While the Internal Revenue Service cannot do much to reduce the actual cost, their tax credits are a great means of defraying the cost and its impact on your tax bill.

One particularly valuable means of defraying the impact of college costs is the lifetime learning tax credit. Tax credits reduce the amount of income tax that a taxpayer is required to pay. This is different from a tax deduction, which reduces the amount of income subject to tax.

The lifetime learning credit offers taxpayers a credit of up to $2,000 each tax year for qualified educational expenses paid on behalf of all eligible students. There is no limit to the number of years this credit may be claimed.

Lifetime Learning Tax Credit

Taxpayers may claim the lifetime learning tax credit if they meet three major criteria. Firstly, eligible taxpayers must be paying the qualifying educational expenses for higher education. Secondly, the educational expenses must be paid on behalf of an eligible student. Last, the eligible student must be either yourself, your spouse, or a dependent for whom you claim a tax deduction on your return

For each student, the taxpayer may only claim one education credit per tax year. This means that a lifetime learning credit may not be claimed in conjunction with another education credit, such as the American opportunity credit. The lifetime learning credit is a non-refundable credit, meaning that while it can reduce your tax to zero, it cannot be paid as a refund beyond the amount used to eliminate tax.

For more information on possible tax credits, consult with a qualified tax lawyer, who can assess your situation and advise on the best means of managing the impact of college costs on your tax bill.

 

 
 
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