(MENAFN- ValueWalk) Rising higher education costs are one of the biggest concerns of parents and students. If it concerns you as well, there is a way you can reduce some of that cost using the 2024 education tax credits . Primarily, there are two education tax credits that taxpayers can use – the American Opportunity Tax Credit (AOTC) and the Lifetime learning Credit (LLC).
Two 2024 education tax credits
Under AOTC, eligible students can claim up to $2,500 in credit, of which $1,000 is refundable. Specifically, a person can claim up to 100% of the $2,000 qualified education expenses and 25% of the next $2,000 qualified expenses.
To claim the AOTC, a student needs to meet the following criteria:
Must be pursuing a college degree or other approved education course. Must be enrolled in the approved educational institution for at least half-time and at least one academic period during the tax year. Students must have completed less than four years of higher education at the start of the tax year. No one else must have claimed AOTC or the former Hope credit on their behalf for over four tax years. Students must not have been convicted of drug felonies at the end of the tax year.
Recipients can use the AOTC to pay for qualified-education related expenses, including course materials, books, tuition, fees and needed equipment. Expenses such as room and transportation don't qualify under AOTC.
The Lifetime Learning Credit is another education tax credit a person can claim. The maximum a person can claim in an LLC is $2,000, or 20% of the qualified education expenses up to $10,000. LLC, however, is entirely non-refundable. This means the recipient won't receive any unused portion as a tax refund.
To claim the LLC, a student needs to meet the following requirements:
They must be enrolled or studying at a qualified educational institution. Student must be pursuing a degree or any other course or taking classes to improve their job skills and opportunities. They must be enrolled for a minimum of one academic period during the tax year.
Education tax credits – what's the need?
2024 education tax credits are much needed now as they can help ease at least some of the financial burden of higher education. It can be claimed by a college student paying for their education expenses and hasn't been claimed as a dependent on someone else's return.
Over the last few decades, the average cost of higher education has increased from $11,411 in 1964 to $26,903 in 2022, according to data from the U.S. Department of Education's Institute of Education Sciences.
Also, the average cost of attending a four-year college was $36,436 as of 2023, according to the Education Data Initiative.
Although both 2024 education tax credits (the American Opportunity Tax Credit and the Lifetime Learning Credit) can offer significant relief, a person can't claim both credits on the same return for the same student.
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