Tax Savings on Education Tax Credits & Deductions for Students and Families

American Opportunity Tax Credit (AOTC)

During the first 4 years of higher education, you can get a credit of up to $2,500 per eligible student. Up to 40% (a maximum of $1,000) is refundable, and the credit phases out at higher incomes (modified AGI of $80,000 to $90,000 for single filers, $160,000 to $180,000 for joint filers).

Here are the full details by the IRS:

AOTC

Lifetime Learning Credit (LLC)

Unlike the AOTC which is during your first 4 years, the LLC has no limit on how many years it can be claimed. Both undergrads and grads can claim it if eligible. The credit is worth up to $2,000 per tax return (20% of the first $10,000 of qualified expenses) and is nonrefundable.

Here are the details by the IRS:

LLC

Student Loan Interest Deduction

You can usually deduct up to $2,500 of student loan interest from your taxable income each year. Small, but helpful.

529 Plans and Coverdell Education Savings Accounts

These are like piggy banks for school expenses. You don't get a tax deduction, but any interest earned from them is tax-free as long as it's used for education.

Disclaimer: This article is for informational purposes only and is not meant to be financial or legal advice.