How to claim tax breaks on your higher education and tuition costs

Ray Martin | CBS Money Watch | Jan 17th, 2017
Category: Miscellaneous

Parents and students paying for college know how expensive it can be. To help defray these costs, many middle-income families qualify for tax credits and deductions when they spend money on education related tuition and fees.

But which credits or deductions you should claim and how you claim them can really matter. Here’s a breakdown of these tax breaks for education, and how to claim them.

The best education tax break for most folks to claim is the American Opportunity Tax Credit, or AOTC. This allows filers to claim a tax credit of up to $2,500, per eligible student, per year, when they’ve paid $4,000 in qualified education tuition and fees. This credit can be used only during the student’s first four years of post-secondary school education. The best feature is that up to $1,000 of this credit is refundable, which means that you can get this money back even if you owe no tax. The credit is calculated as 100% of the first $2,000 of qualified tuition, fees and expenses (but not room and board), and 25% of the next $2,000 of education costs. Each student for which the credit is claimed must be enrolled at least half time. This credit, which is a dollar-for-dollar refund of tax, is only available to married tax filers with modified adjusted gross income of below $160,000 (below $80,000 for single and other filers). Also, any felony drug convictions by the end of 2016 disqualify the student from receiving this credit. Qualified education expenses include tuition, required fees, books, supplies, equipment or other required course materials, but not room and board.

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