If you, your spouse, or one of your dependents are spending time in a college classroom this year, you’re eligible for education tax credits that give you back some of the money you’re spending. The IRS sent out a bulletin this week outlining how people can take advantage of these credits. Here’s what you need to know.

  • The American Opportunity Tax Credit — With this credit you can deduct up to $2,500 each year, and it applies for the first four years of higher education. 40% is refundable, meaning that even if you don’t owe any taxes you could get up to $1,000 as a refund.
  • The Lifetime Learning Credit — This credit allows you to claim up to $2,000 on your federal return, and there’s no limit on number of years you can claim it.
  • Just one claim per type per year  If more than one student qualifies for credits in the same year, you could apply the AOTC to one and the LLC to the other. 
  • Only certain expenses qualify  Certain expenses qualify, such as tuition and fees, but others don’t, such as room & board and medical expenses. 
  • Your school must be eligible  In order to receive the credits, your school must offer education beyond high school and be accredited (virtually all accredited public, nonprofit, and privately-owned–for-profit post secondary institutions). 
  • Form 1098-T lists most of your qualified expenses — You should receive Form 1098-T, Tuition Statement, from your school, which reports tuition and fees. Books and other related expenses that may also qualify won’t be listed, so you’ll need to consider those as well.
  • You can’t claim an education credit if you were a nonresident alien for any part of the tax year unless you elect to be treated as a resident alien for federal tax purposes.
  • These credits aren’t for high-income taxpayers  The credits are subject to income limitations and are reduced as income levels go up. 

For more information, check out the Tax Benefits for Education Information Center on IRS.gov.