Many individuals with children and individuals who are advancing their education don’t know that they may be eligible for certain tax credits. Do you have children in college or have you recently decided to return to college? Do you have children? Have you paid someone to take care of your children so that you can work? If you answered yes to any of these questions then keep reading because you will want to take advantage of the higher education and child tax credits.
Child Tax Credits
The Child Tax Credit is for individuals who have a dependent child that is age sixteen or younger. Federal income tax may be able to be reduced by up to a $1,000 for each qualifying child.
The Child and Dependent Care Credit are for individuals who paid someone to care for their child or dependent so they could work. If filing a joint return, both taxpayer and spouse must show earned income to qualify for this credit. If you qualify this credit could reduce your federal income taxes up to $3,000 for one dependent and $6,000 for two or more dependents. The dependent must meet the criteria for age, relationship, support, dependent, citizenship, and residence.
The American Opportunity Credit
This tax credit is for students who are at least attending half-time at an accredited school. The credit is available during the first four years of higher education. You can be eligible for up to $2,500 per student. Tuition, books, supplies, etc. are all qualifying expenses for this credit which can only be claimed by the student on their tax return or by the parent if the student is their dependent. Students who are a dependent cannot claim the credit.
The Lifetime Learning Credit
The Lifetime Learning Credit can be claimed by anyone taking higher education classes, with no requirement for being enrolled at least half-time. It can also help pay for undergraduate and graduate degree courses. There is no limit on the number of years this credit can be claimed which could result in up to a $2,000 tax savings per year. This credit has the same rules as The American Opportunity Credit regarding who it can be claimed by and what expenses qualify.
*All of these credits are subject to adjusted gross income phase outs which can be found on the IRS website.