According to IRS Form 970, eligibility requirements for the Hope Credit and the Lifetime Learning Credit include:
Qualified expenses are:
Students convicted of a drug-related felony are not eligible for the Hope Credit but still qualify for the Lifetime Learning Credit. Also, the Lifetime Learning Credit can be used for all years of education, but the Hope Credit is only available for the first two years of post-secondary education.
No, the IRS does not send you a check for a tax credits that reduce your owed tax below $0.
If you are married and both you and your spouse are in school, each person can choose their tax credit. This means that married couples can qualify for up to $4,000 in tax credits reducing the burden of tuition significantly.
Tax credits are more beneficial than tax deductions. Tax deductions reduce your taxable income and tax credits actually reduce your taxes. For example, a $2,000 tax deduction takes $2,000 off of your income, saving you a couple hundred dollars in taxes but a $2,000 tax credit saves you the full $2,000.
No, the IRS does not allow you to take all deductions so choose the best tax advantage for your family.
Income restrictions often change, so check the restrictions every year. If you make more than $53,000 as an individual or $107,000 for a joint return, you are not eligible for credit and deduction options. For more detailed information about tax benefits of higher education, visit the IRS website.
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