The American Opportunity Credit and lifetime learning credit may help offset the cost of higher education for you, your spouse and your dependents.
The amount of these credits are based on the qualified education expenses, such as college or vocational school tuition and enrollment fees, that you paid during the year and may be limited by your modified adjusted gross income. Items such as insurance, personal living expenses, and room and board are not considered qualified education expenses.
The Taxpayer Certainty and Disaster Tax Relief Act of 2020 repealed the tuition and fees deduction for tax years beginning after 2020. Income limitations for the lifetime learning credit will be increased to help filers transition to the lifetime learning credit.
When can the American Opportunity Tax Credit be claimed?
The American Opportunity Tax Credit can be claimed for tuition and certain fees you pay for higher education in 2020. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act extended the American Opportunity Tax Credit through 2020
When can the Lifetime Learning Credit be claimed?
The Lifetime Learning Credit, which is up to a $2,000 tax credit per tax return, can be claimed by those taking undergraduate, graduate or professional degree courses. There is no limit to the number of years you can take this credit.
When can the Tuition and Fees deduction be claimed?
The tuition and fees deduction for tax years beginning after 2020 can no longer be claimed.
Prior to 2021: The Tuition and Fees Deduction could be claimed by those taking undergraduate, graduate and professional degree courses. This deduction may have been beneficial if the modified adjusted gross income limits were higher than the thresholds for the American Opportunity Tax and Lifetime Learning Credits.
Are you paying Student Loan interest?
You may be able to deduct up to $2,500 from your income per tax return. Student Loan interest may be deducted even while your student is in school if you are paying the interest immediately rather than deferring the payments.
You cannot claim the American Opportunity Tax Credit, Lifetime Learning Credit and the Tuition and Fees Deduction for the same student in the same year. You will want to choose the credit or deduction that provides the greatest benefit. However, you can claim the Student Interest Loan deduction and one of these other benefits simultaneously.