Education tax benefits can offset college costs

Education tax benefits can offset college costs

Planning your college course schedule is important — and so is planning for the tax benefits available to help offset the expense of paying for those courses.

For 2012, federal education tax benefits include two credits: the American opportunity credit and the lifetime learning credit. Each has different rules, and you can only take one per student in the same year.

In addition, you’re limited to receiving one tax benefit from the same expenses. For example, say your employer provides educational assistance, and you use the money for qualified expenses, such as tuition. The employer-provided assistance is generally tax-free, so you do not include the expenses for which you used the money when calculating your American opportunity or lifetime learning credit.

The one-benefit rule also applies to expenses paid with scholarships, grants, or other tax-free assistance, or that you deduct elsewhere on your federal income tax return.

You can, however, claim whichever credit applies for other out-of-pocket education expenses. That’s true no matter whether you pay by cash, check, credit card, or loans.

If someone in your family is headed to college this year, please give us a call. We’ll help make paying for the courses a less taxing experience.