For the 2011 tax year, two tax credits are available to help you offset the costs of higher education. You may be eligible to claim an education credit if you, your spouse, or a dependent you claim on your tax return was a student enrolled at or attending an eligible educational institution. The credits are based on the amount of qualified education expenses paid for the student in 2011 for academic periods beginning in 2011 and in the first 3 months of 2012.
Lifetime Learning Tax Credit
The Lifetime Learning tax credit is a non-refundable federal income tax credit of up to $2,000 (20% of the first $10,000) for qualified tuition and related expenses. The amount of your lifetime learning credit for 2011 is gradually reduced if your modified adjusted gross income is between $51,000 and $61,000 ($102,000 and $122,000 if you file a joint return).
American Opportunity Credit
The American Opportunity Credit is a refundable credit up to $2500 (100% of the first $2000 and 25% of the next $2000 ) for qualified expenses paid for each eligible student. This credit is only available to students who are in the first 4 years of post-secondary education. The amount of your American Opportunity Credit for 2011 is gradually reduced if your modified adjusted gross income is between $80,000 and $90,000 ($160,000 and $180,000 if filing a joint return).
In addition to the two tax credits, the student loan interest deduction may be available to you.
Student Loan Interest
Students can deduct up to $2,500 of student loan interest paid in 2011 on any federal or private educational loans on your federal tax return. The loans must have been used to fund half time or greater attendance. You may qualify for this deduction if your modified adjusted gross income is less than $75,000 ($150,000 if you file a joint return).
NOTE: These summaries, current at press time, are meant to give a general overview of these educational tax initiatives. Consult a tax advisor or IRS Publication 970 regarding the specifics of your personal situation.