It is often said that a good education is worth its weight in gold, and when it comes to taxes this is literally true. There are two tax credits available to those pursuing higher education at the undergraduate and graduate levels--the American Opportunity tax credit and the Lifetime Learning tax credit.
The American Opportunity tax credit is available to those who are pursuing an undergraduate degree. The value is up to $2500 and can be used for tuition, books, and equipment.
The Lifetime Learning tax credit is up to $2000 and can be used to help pay for graduate studies.
Since these are tax
credits
, not deductions, this is basically cash in the bank. It is not merely reducing your taxable income--it is literally lowering your tax bill by the amount of the credit. You will get a form 1098T from any university where you have paid tuition, which you will need to claim the credit.
In addition to these tax credits, you can also deduct up to $2500 for interest paid on student loans when you file your tax returns.
