I want to share some of the biggest ones available right now so you can see which one your family would qualify for and would benefit from the most when you prepare your taxes before the tax deadline.

American Opportunity Credit

Originally called the Hope Credit, the American Opportunity Credit allows those seeking a post-secondary education a tax credit of up to $2,500 per qualifying student. Qualified expenses include tuition and fees.

It has been expanded from covering 2 years to 4 years and now you can claim the expenses you paid for required course materials.

Lifetime Learning Credit

Like the American Opportunity Credit, the Lifetime Learning Credit allows you to receive credit for qualified education expenses you paid.

There is no limit to the number of years you can use the Lifetime Learning Credit, so if you’re taking classes to keep certified, this may be an option for you. Please be aware that you can not claim both the American Opportunity Credit AND Lifetime Learning Credit in the same year.

Deducting Tuition and Fees

If your income doesn’t allow you to take advantage of the American Opportunity or Lifetime Learning Credit, you may still be able to deduct some of your education expenses under the Tuition and Fees Deduction. This deduction can be worth up to $4,000, lowering your taxable income for the year.

To qualify for this deduction, please make sure that you’re claiming this for either yourself, your spouse, or your dependent.

Student Loan Interest Deduction

Just because you finished college doesn’t mean you have no tax breaks. If you have student loans, you may be able to deduct the interest you paid on the loans in 2012. If you meet the income requirements (modified adjusted gross income (MAGI) is less than $75,000 for single filers and less than $155,000 for those married filing jointly) then you may be able to deduct up to $2,500.

Even better, you don’t have to itemize your deductions to claim this on your taxes. Federal student loans would meet the criteria for deducting student loan interest, but a loan from a relative would not.

Thoughts on College and Tax Breaks

There are other tax deductions you may want to look into, including setting up tax advantage accounts for your younger children who won’t be attending college for some years. Using tax software like TurboTax can help you uncover what you’re entitled to and simplify filing your taxes so that you can keep more money in your pocket.

I’d love to hear from you about your family’s take on this topic. If someone in your family is going to college, which tax credits and deductions have you used?

Good News for your Valentine’s day and your tax refund!  The IRS announced today that they are now able to process tax returns that contain form 8863 with Education Credits beginning February 14^th.  Form 8863 is used to claim two higher education credits — the American Opportunity Tax Credit and the Lifetime Learning Credit.

Read the full IRS update

The IRS announced today that they will not be able to process tax returns with Form 8863 until mid-February.  This is a delay that will impact all tax preparation methods.

What is Form 8863?

Form 8863 is the form that is used to claim the American Opportunity Credit and the Lifetime Learning Credit.

American Opportunity Credit:  The American Opportunity Tax Credit is offered to students who pay qualified tuition (and aren’t claimed as dependents elsewhere), as well as to parents who pay expenses for their dependent students or themselves.  This tax credit allows you to claim up to $2,500 per student. The full credit is available for individuals with a MAGI(Modified Adjusted Gross Income) of $80,000 or less, $160,000 for married filing jointly. It is 40% refundable, meaning that you can get up to $1,000 back even if you don’t owe taxes.

Lifetime Learning Credit:  The Lifetime Learning Credit a perk available to you if you paid qualified college expenses.  Rather than limiting your ability to get tax credits for education expenses for the first four years of college, it’s possible to use the Lifetime Learning Credit to offset your expenses even in graduate or professional school. As long as the educational institution is qualified, undergraduate or beyond, you can qualify for up to $2,000 in tax credits for your expenses. It’s figured on 20% of your tuition and fees, up to the first $10,000. There is a phase out as you reach certain income levels. Parents can claim this for dependent students.

Can I still File?

Yes!!!  TurboTax is up to date with all the latest tax law changes, including changes to the American Opportunity Credit and Lifetime Learning Credit, so you can be confident that you are getting every deduction and credit you deserve on your tax return.  We recommend that you file now with TurboTax, so you will be at the front of the line for your refund when the IRS begins to process these returns. Returns will be submitted on a first in, first out basis.  For the fastest refund possible, make sure you e-file and select direct deposit.

Last year, the IRS issued  9 out of 10 refunds in 21 days or less  and expects the same results this year.  Once your return is accepted by the IRS, you can track the status of your return you can login in to your MyTurboTax account at anytime.