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Are you eligible for educational tax credits?
If you or your dependent is a student, you may want to determine whether you are eligible for one of the two educational tax credits that cover common student expenses. These credits provide greater tax savings than a tuition deduction since they reduce your tax bill on a dollar-for-dollar basis.
What education expenses qualify for the education credit?
Expenses that qualify for an education credit (whether the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit) are qualified tuition and related expenses paid by the taxpayer during the taxable year.
How is the education tax credit calculated?
To calculate an education credit, you must factor in: The amount of qualified tuition and related expenses you paid for each eligible student in the taxable year, and; The amount of your modified adjusted gross income for the taxable year. The education tax credit amount for each eligible student is also subject to a phaseout.
What are the best education tax credits for student loans?
The American opportunity credit is generally the most valuable education tax credit, if you qualify. You can claim these education tax credits and deductions even if you paid for school with a student loan.