Tax Tip 2021-106: Here’s what taxpayers need to know about higher education tax credits

IRS Tax Tips July 22, 2021
Useful Links: IRS.gov Help For Hurricane Victims News Essentials What's Hot News Releases IRS - The Basics IRS Guidance Media Contacts Facts & Figures Around The Nation e-News Subscriptions The Newsroom Topics Multimedia Center Noticias en Español Radio PSAs Tax Scams/Consumer Alerts The Tax Gap Fact Sheets IRS Tax Tips Armed Forces Latest News IRS Resources Compliance & Enforcement News Contact Your Local IRS Office Filing Your Taxes Forms & Instructions Frequently Asked Questions Taxpayer Advocate Service Where to File IRS Social Media	Issue Number: Tax Tip 2021-106 Here's what taxpayers need to know about higher education tax credits   As a new school year approaches, students are considering what classes they need to take and how much the classes will cost. Whether it's community college, a trade school, a four-year university or an advanced degree, higher education is expensive. The good news is tax credits can help offset these costs. These credits reduce the amount of tax someone owes. If the credit reduces tax to less than zero, the taxpayer could even receive a refund. Taxpayers who pay for higher education in 2021 can see these tax savings when they file their tax return next year. If taxpayers, their spouses or their dependents take post-high school coursework, they may be eligible for a tax benefit. There are two credits available to help taxpayers save money on higher education, the American opportunity tax credit and the lifetime learning credit. Taxpayers use Form 8863, Education Credits, to claim the credits. Here are some important things taxpayers should know about these credits. The American opportunity tax credit is: Worth a maximum benefit of up to $2,500 per eligible student. Only for the first four years at an eligible college or vocational school. For students pursuing a degree or other recognized education credential. Partially refundable. People could get up to $1,000 back. The lifetime learning credit is: Worth a maximum benefit of up to $2,000 per tax return, per year, no matter how many students qualify. Available for all years of postsecondary education and for courses to acquire or improve job skills. Available for an unlimited number of tax years. To be eligible to claim either of these credits, a taxpayer or a dependent must have received a Form 1098-T from an eligible educational institution. There are exceptions for some students. Taxpayers can use the Interactive Tax Assistant tool on IRS.gov to find out if they're eligible for these credits. More information: Compare Education Credits Publication 970,Tax Benefits for Education Share this tip on social media -- #IRSTaxTip: Here's what taxpayers need to know about higher education tax credits. https://go.usa.gov/xFxVT Back to Top         Thank you for subscribing to IRS Tax Tips, an IRS e-mail service. For more information on federal taxes please visit IRS.gov. This message was distributed automatically from the IRS Tax Tips mailing list. Please Do Not Reply To This Message.

 

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