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