The American Opportunity Tax Credit is offered to students who pay qualified tuition (and aren’t claimed as dependents elsewhere), as well as to parents who pay expenses for their dependent students or themselves. This tax credit allows you to claim up to $2,500 per student. The full credit is available for individuals with a MAGI(Modified Adjusted Gross Income) of $80,000 or less, $160,000 for married filing jointly. It is 40% refundable, meaning that you can get up to $1,000 back even if you don’t owe taxes.
The Child Tax Credit is a credit that may reduce your tax by as much as $1,000 for each of your qualifying children. The Additional Child Tax Credit is a credit that you may be able to take if you are not able to claim the full amount of the Child Tax Credit. You may not qualify for the Child Tax Credit, but qualify for the Additional Child Tax Credit.
The earned income credit is a refundable tax credit designed for lower income working families and individuals. The amount of the credit varies depending on your level of income and how many dependents you support. The tax credit can even generate a tax refund larger than the amount of tax paid in through withholding. For the years 2009 through 2012, the Earned Income Credit is temporarily increased for working families with three or more dependents.
The Lifetime Learning Credit a perk available to you if you paid qualified college expenses. Rather than limiting your ability to get tax credits for education expenses for the first four years of college, it’s possible to use the Lifetime Learning Credit to offset your expenses even in graduate or professional school. As long as the educational institution is qualified, undergraduate or beyond, you can qualify for up to $2,000 in tax credits for your expenses. It’s figured on 20% of your tuition and fees, up to the first $10,000. There is a phase out as you reach certain income levels. Parents can claim this for dependent students.
The easiest way to learn about these tax credits is to use the applications found on the IRS Web site www.irs.gov. Those applications will help you determine if you qualify for the tax credits established by the government.