Education Tax Benefits

Even if you don't itemize your tax deductions, you could save money with these education credits and deductions.

* American Opportunity Credit or Hope Credit — You can claim either the American Opportunity Credit or the Hope Credit. The American Opportunity Credit is equal to 100% of the first $2,000 and 25% of the next $2,000 per student for tuition and related fees, with a credit maximum of $2,500 per student. It's restricted to the first 4 years of college and can be claimed only 4 times per student. Up to $1,000 of the credit may be refundable. It generally will be advantageous to claim the Hope Credit only if a student is attending an education institution in a Midwestern disaster area. The credit for these students is equal to 100% of the first $2,400 and 50% of the next $2,400 per student for tuition and related fees, with a credit maximum of $3,600 per student. However, if you choose to claim the Hope credit, you must use it for all students and the credit for students not attending a school in a Midwestern disaster area is only 100% of the first $1,200 and 50% of the next $1,200 per student for tuition and related fees, with a credit maximum of $1,800 per student. In addition, the Hope credit can't be used for a student if you've already claimed it for that student more than once.
* Lifetime Learning Credit — A credit of 20% of your annual tuition and related fees, with a credit maximum of $2,000 per return. The tax credit may be claimed for an unlimited number of years.
* Tuition and Fees Deduction — You can deduct up to $4,000 per student for tuition and fees.
* Student Loan Interest Deduction — Deduct up to $2,500 per return for interest paid on student loans.
* Exclusion for Savings Bond Interest — Some or all of the interest received from eligible bonds issued after 1989 may be excludable if qualified higher education expenses for the year are at least as much as the proceeds of the redeemed bonds.

Note: You can't use the same expenses to claim more than 1 of the above benefits, and other restrictions apply.