In the coming tax season, you should claim education tax credits you qualify for. Learn more about tax credits for education here.
If you want to pay less tax or get a bigger tax refund come tax time, you need to take advantage of all tax deductions and credits you qualify for. These includes tax deductions and credits for education. The IRS understands that paying for education is a financial burden, and for that reason, they offer tax credits and deductions for education come tax time. Here are education tax credits 2020 you need to look at, and claim if you qualify the coming tax season.
1. American Opportunity Credit
This is one of the main tax credits you can claim for education. The tax credit is available to qualifying students and parents/guardians with qualifying students. The credit is worth up to $2,500, and can reduce your tax bill significantly. More to that, you can get a tax refund from this tax credit as $1,000 of the credit is refundable. To qualify you must be a student or a parent to a student enrolled at a school which is part of the Federal Student Aid Program.
The American Opportunity Credit covers almost everything ranging from tuition fees to learning materials you have to buy. Simply, the credit aims to relive you the financial burden brought by the high cost of education. The tax credit has strict guidelines, but it’s worth claiming if you qualify for it.
2. Lifetime Learning Tax Credit
This is a more available education tax credit you need to look at and claim if you are eligible for it. The tax credit is for anyone who is studying and takes at least one course per year. The advantage is that you don’t have to be pursuing any form of certification to be eligible for it. On the other hand, the only problem is that you must be taking the course or studying at a school enrolled in the Federal Student Aid Program. This tax credit covers tuition and education supplies you must buy at the school. The credit is non-refundable, and is worth up to $2,000.
Other Education Tax Breaks
All college students are eligible for a write off of $4,000 per year on tuition fees. Also, you can get a student loan payment deduction of $2,500. If you paid an interest on a student loan in 2019, you can have your taxable income reduced by $2,500. For instance, if you fall into the 22% tax bracket and qualify for student loan interest deduction, you will put $550 back to your pocket come tax time, that is if you claim it.
Advantages of Claiming Education Tax Credits?
If you qualify for these education tax credits, you need to claim them. However, for college students you can only take one credit, but qualifying parents can claim more than one education tax credit. The main advantage of these tax credits is that they reduce your tax bill dollar for dollar. Unlike education tax deductions that reduce your taxable income. Therefore, you should take advantage of the tax credits and you will smile come tax period to see your tax bill reduced significantly.
Although there are strict guidelines on claiming education tax credits, you should claim them if you qualify. To know if you qualify or not, use online tax filing software, and education tax credit and deduction calculator to get an estimate of how much you could claim the coming tax season. Then prepare and file your taxes online, making sure you claim the education, and other tax deductions and credits you are eligible for.