Back-to-School Tax Savings for Parents

Posted on 07/25/2024

As the back-to-school season approaches, it's essential for parents to be aware of the potential tax savings available for education expenses. Understanding and leveraging these tax benefits can help reduce your overall tax burden and make education more affordable.

American Opportunity Tax Credit (AOTC)

The American Opportunity Tax Credit is a valuable tax credit that can be worth up to $2,500 per eligible student. Here are the key points to remember:

Eligibility: The credit is available for the first four years of higher education.
Qualified Expenses: Tuition, fees, and course materials.
Income Limits: There are income limits to qualify, so check the latest IRS guidelines.
How to Claim: You can claim the AOTC by filling out Form 8863 when you file your federal tax return.

Lifetime Learning Credit (LLC)

The Lifetime Learning Credit is another excellent opportunity to save on education costs:

Eligibility: Available for all years of post-secondary education and for courses to acquire or improve job skills.
Qualified Expenses: Tuition and fees required for enrollment.
Credit Amount: Worth up to $2,000 per tax return.
Income Limits: Similar to the AOTC, income limits apply.

Additional Tips for Education-Related Tax Savings

529 Plans: Contributions to a 529 plan are not deductible, but earnings grow tax-free, and withdrawals for qualified education expenses are also tax-free.
Student Loan Interest Deduction: You can deduct up to $2,500 of interest paid on student loans.
Tuition and Fees Deduction: Although expired for tax year 2021, it's worth checking if this deduction has been renewed.

By understanding these credits and deductions, parents can significantly reduce the financial burden of education expenses. Don't miss out on these valuable tax benefits.

For personalized assistance and to ensure you're maximizing your education-related tax savings, contact our office at (202) 824-8123. Our experts are here to help you navigate these opportunities