Written by: Melinda Long, CPA

There are plenty of times we are asked about which education credit is most beneficial for a client to use.  Below is a short list of various credits in the order of the biggest credit to smallest.

  1. American Opportunity Credit – Receive a credit up to $2,500 PER STUDENT per year.  Fees to include are tuition and fees, books and supplies.
  2. Lifetime Learning Credit – Credit up to $2,000 PER TAXPAYER per year.  Only tuition and fees can be used to calculate this credit.
  3. Tuition and Fees Deduction – Deduction of up to $4,000 per taxpayer.  Only tuition and fees can be used to calculate this deduction.
  4. Qualified Scholarship– Amount is excluded from gross income.  Tuition, fees, books and supplies are used to calculate this amount.
  5. Qualified Tution Program – Tax-free earnings.  Can use the funds from this 529 plan for tuition, fees, books, supplies, room and board.
  6. Coverdell ESA– Tax-free earnings.  Can use the funds from this ESA for tutition, fees, books, supplies, room and board.

For adjusted gross income phaseouts and a more indepth explaination of these credits/deductions, visit the Tax Benefits for Education page on the IRS.gov website.