Believe it or not, if you file a federal tax return and owe taxes, you can enjoy tax breaks when paying for education. In any year, you can take advantage of one of the following:
- Hope Scholarship Tax Credit – This is a credit that can be subtracted from your federal tax bill. You can claim the Hope Scholarship Tax Credit two times for one student – but only for the freshman and sophomore years.
- Lifetime Learning Tax Credit – A maximum tax credit of 20 percent of the first $10,000 of a student’s qualified educational expenses may be applied over an unlimited number of tax years.
- Tuition and Fees Tax Deduction – For taxpayers who don’t qualify for the Hope or Lifetime Learning tax credits, this deduction reduces taxable income.
Make sure you check with your tax preparer with regards to these educational programs.