1. The American Opportunity Tax credit
   
2. Lifetime Learning Credit
   

The cool things about credits is that they directly reduce the amount of tax you owe. However, if you are eligible for both you can only take one. You cannot claim these credits if your filing status is married filing separately or if another person can claim an you as a dependent.

The American Opportunity Education Tax credit

To be eligible for the American Opportunity Tax credit, your student must be pursuing a 4 year degree at least half time. Your student must not have any felony drug conviction. The American Opportunity tax credit cannot be claimed for more than four tax years. The maximum annual credit you can take is up to $2,500 per student.

Limitations

1. Your adjusted gross income cannot exceed 90,000 for a single person and 180,000 for married filing jointly.
   
2. Qualified expenses are tuition, required enrollment fees and course materials needed for the course of study. No room and board expenses are deductible
   
3. Expenses must be paid you, your spouse, student and/or a third party. An example of a third party would be a relative of friend.
   

Lifetime learning education credit

With the lifetime learning credit, your student does not have to pursue a degree, can be in any education level and can claim the credit for unlimited tax years. Your student must be enrolled in at least one course. Felony conviction does not apply. Maximum annual credit is up to 2,000 per tax return.

Limitations

1. Adjusted gross income limits are 62,000 for single, head of household, or qualifying widow and 124,000 for married filing jointly.
   
2. Qualified expenses are tuition and fees required for enrollment or attendance and paid to the institution.
   
3. Expenses must be paid by you, your spouse, student and/or third party.
   

What is considered a qualified expenses?

• Tuition
  
• Fees for enrollment
  
• Books
  
• Supplies
  
• equipment
  

What is not considered a qualified expenses?

• Personal expenses
  
• Room and board
  
• Insurance( health or any other)
  
• Transportation
  
• Any course involving sports, games or hobbies (unless it is part of the students degree under the Lifetime Learning Credit)
  

How to claim the credit

You should receive a form 1098-T from the institution. However the amount you actually paid may be different (make sure to keep your receipts).

You will be using Form 8863 to claim these credits, only use the amount you actually paid i.e. be sure to exclude any scholarship payment.