Two tax credits are available to postsecondary students.
The best-known credit is the American Opportunity credit, which is available to undergraduate students. The credit covers 100 percent of the first $2,000 of tuition and related expenses, plus 25 percent of the next $2,000, for a maximum of $2,500 per year for each qualifying student.
There are some limitations on the AO credit: The student must be enrolled at least half-time, the household income can be no more than $80,000 for single filers or $160,000 for joint filers and the credit is available for a maximum of four years.
The AO credit has only been renewed through 2012, but President Obama announced in his State of the Union address that he wants it to be made a permanent part of the tax code.
All adult students, not just those enrolled in undergraduate degree programs, are eligible for the Lifetime Learning Credit. If you’re in graduate school, or if you’re taking just one class to improve your job skills, you’re eligible! The LLC covers 20 percent of the first $10,000 in tuition, fees, and expenses, for a maximum of $2,000 per year. The income limitations are stricter than the AO — $48,000 for single filers and $96,000 for joint filers.
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