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Is there a tax credit for college tuition?

On Behalf of | May 23, 2019 | IRS, Tax Law

Most people would agree that going to college is expensive. Even if you, your spouse or one of your children is an Illinois resident and attends a state school, tuition represents a significant expense. Private and out-of-state tuition could reach well into the thousands of dollars per year.

When it comes time to do your income taxes, you could receive some relief from those costs. Admittedly, you may not get back as much as you would like, but something is often better than nothing.

The lifetime learning tax credit

According to the U.S. Tax Code, you could deduct 20% of the first $10,000 in tuition paid per year. For example, if your tuition costs are $5,000, you could earn a tax credit of $1,000, which is 20% of that amount. If your tuition exceeded $10,000 in a year, you can only earn a maximum of $2,000 from this credit. To take advantage of the lifetime learning tax credit, you must meet the following criteria:

  • The requirement for qualified expenses only extends to tuition and any fees attached to it. Books, room and board, and other college expenses do not count.
  • If your college, vocational school, university or other post-high school institution works with the U.S. Department of Education to provide student loans, it meets the requirement of a qualifying institution. This ordinarily includes all accredited universities and colleges.
  • As long as the person whose tuition you pay qualifies as a dependent for income tax purposes, you can claim this credit. However, you and your spouse must file a joint return if you pay your spouse’s tuition.
  • Your income must not exceed a certain amount depending on your filing status.

Other education tax credits may be available in your situation, so you may want to compare them with this one in order to receive the most benefit. Moreover, you will want to verify that you qualify for this and other credits. The last thing you need is for the IRS to reject your usage of this credit or to question all of your credits and/or deductions.

Instead, you could do what other Illinois residents in your position have done and consult with a tax attorney. It is his or her job to remain updated on the latest changes in tax law. In addition, you could gain an understanding of what your rights are when dealing with the IRS and learn what your legal options are should you disagree with any action proposed by the agency.