Education Credits: Tax Breaks for College

Today's tax question comes from Dolly in Houston, Texas. She asks, "My daughter is in college, I payed for her tution about $12,000.00 during 2005. Is any other way to get more credit for her education, because I know Form 8863 for education credit, but is any way I can get more tax credits?"

Depending on your income level, you might qualify for the tuition and fees deduction or one of the education tax credits.

If your daughter is in her first two years of college, the best bet is to take advantage of the Hope Credit. This provides a tax credit of up to $1,500 on the first $2,000 of college tuition.

The Lifetime Learning Credit provides a tax credit worth 20% of college tuition, up to a maximum of $2,000 per tax return. So if you paid $12,000, your maximum Lifetime Learning Credit would be $2,000.

If you make over $53,000 (or over $107,000 if married filing jointly), you are not eligible for the Education Credits. You'll want to take a look at the tuition and fees tax deduction. This deduction provides a deduction of up to $4,000.

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