If you’re going to college to make your life better then Uncle Sam wants to give you a reward. It’s the IRS college tax credit, which comes in two forms. One is the American Opportunity Tax Credit and the other is the Lifetime Learning tax credit. The former is for getting a four-year college degree. The latter is for job-related college courses that are taken but not as part of a degree program.
The American Opportunity College Tax Credit
The IRS will credit your tax bill and even refund up to 40% of your college tax credit for qualified payments you made. The payments must be for tuition and required fees for a four year college degree. The American Opportunity college tax credit is available only for the first four years of college, whether you need more time to finish your degree or not. The student can be you or a dependent like your son or daughter or your spouse. They have to be claimed as a dependent on your federal income tax return. Along with that return you’ll be filing IRS form 8863.
The courses have to be part of a four-year degree program and the student has to be enrolled in the program towards a degree and enrolled for at least one semester during the tax year.
The Lifetime Learning College Tax Credit
If you aren’t enrolled in a four year college working towards a degree but you take college courses, it may be worthwhile to look into the Lifetime Learning college tax credit. This can be used all your life for when your college courses relate to your job or for a job you want. It’s to encourage you to get better employment, basically. For this college tax credit the rules are little less stringent. For one, you can be a drug felon and still get this tax credit, unlike the American Opportunity credit. For two, there’s no four-year limit (the American Opportunity is good for four years and then it’s over forever). For another, you can just take a course but not enroll in a program for this college tax credit.
Rules for Both Types of College Tax Credits
Your “college” or post secondary educational institute must be accredited: no fly-by-night colleges allowed. Secondly, the costs that these college tax credits cover are for tuition and necessary fees, NOT room and board or transportation or anything personal.