Taxpayers who pay for higher education in 2020 can see these tax savings when they file their tax return next year. If taxpayers, their spouses or their dependents take post-high school coursework, they may be eligible for a tax benefit.
There are two credits available to help taxpayers save money on schooling, the American opportunity tax credit and the lifetime learning credit. Taxpayers use Form 8863, Education Credits, to claim the credits.
To be eligible to claim either of these credits, a taxpayer or a dependent must have received a Form 1098-T from an eligible educational institution. There are exceptions for some students.
Here are some key things taxpayers should know about each of these credits.The American opportunity tax credit is:
- Worth a maximum benefit of up to $2,500 per eligible student.
- Only for the first four years at an eligible college or vocational school.
- For students pursuing a degree or other recognized education credential.
- Partially refundable. People could get up to $1,000 back.
- Worth a maximum benefit of up to $2,000 per tax return, per year, no matter how many students qualify.
- Available for all years of post secondary education and for courses to acquire or improve job skills.
- Available for an unlimited number of tax years.
IRS Tax Tip 2020-103, August 17, 2020