Education Credits

Today TaxMama hears from Mike in the Tax Parlor says, ” I was just wondering how the Hope Credit works. I am a Graduate Student and was disappointed that my refund was low (about $200 compared to previous years when it had been $500), so I was going through looking for things I missed. I remembered I had a 1098-T, which stated on line 2 that the “amounts billed for qualified tuition and related expenses” for this year was $10,000. So I put that in the Hope Credit section and it raised my refund by at least a few hundred dollars. But this was all paid by Student Loan money…

It seems to good to be true… Is this legit?”

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Hi Mike,

It does sound so good, doesn’t it?

Well, you’re entitled to use the Hope Credit for more than one year. It’s worth up to $1,500 per student. You may use it for the first two years of college. You can read more about this here:
http://www.irs.gov/publications/p970/ch02.html

After that, you get the Lifetime Learning Credit. And you can use that for the rest of your life.
This is worth up to $2,000 per year, depending on your income level.
You can read more about the Lifetime Learning Credit here:
http://www.irs.gov/individuals/article/0,,id=96273,00.html

Since it’s worth up to 20% of the first $10,000 in qualified educational expenses – you’re apt to get some extra money!

And remember, you’ll find answers to lots of questions about education credits and other tax information, free. Where? At TaxMama.com

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