Tax Tips: Education Credits

Education credits are available to those who are enrolled in post-secondary education leading to degrees. You can claim either the Hope Credit or the Lifetime Learning Credit, but both cannot be claimed in the same year. You can claim the credit for yourself, your spouse, and your dependents. If you claim your child as a dependent, that child cannot claim the credit for himself or herself.

The Hope Credit can be claimed for the first two years only of college or vocational school for a student that is enrolled at leas half-time for at least one academic period during the year. The maximum credit is $1,650 per student, including 100% of the first $1,100 of qualified tuition and related fees paid during the tax year, plus 50% of the next $1,100.

The Lifetime Learning Credit can be claimed for any year of study in any undergraduate, graduate, or professional degree course. The credit is equal to 20% of the first $10,000 of tuition and fees, up to a maximum of $2,000 per tax return.

If the student has any federal or state felony convictions for possessing or distributing drugs, neither credit can be claimed. The credits are also phased out for higher levels of income. More information can be found in Publication 970, Tax Benefits for Education.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.