Tax Credit Opportunities Just for Parents!
Back to School Tax Planning Tips for Parents
What is the American Opportunity Tax Credit?
The American opportunity tax credit (AOTC) is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. You can get a maximum annual credit of $2,500 per eligible student. If the credit brings the amount of tax you owe to zero, you can have 40 percent of any remaining amount of the credit (up to $1,000) refunded to you. The amount of the credit is 100 percent of the first $2,000 of qualified education expenses you paid for each eligible student and 25 percent of the next $2,000 of qualified education expenses you paid for that student. But, if the credit pays your tax down to zero, you can have 40 percent of the remaining amount of the credit (up to $1,000) refunded to you.
For the American Opportunity Credit, qualified expenses include tuition, student activity fees paid directly to the school, books, supplies, and equipment needed for a course of study. And they must be paid to an eligible institution — essentially any accredited public or private college, university, or vocational school that is eligible for a U.S. Department of Education student aid program.
Use Tax-Deferred Accounts to Pay for Educational Expenses
You can use tax-deferred accounts (i.e., an Educational Savings Account) to pay for qualified educational expenses including books and computers for elementary, high school and college expenses.
Before and After School Care Can Be Deducted
For a child under the age of 13, the cost of before or after school care may qualify you for a tax credit if it is a qualifying expense. The child and dependent care credit provides a tax break for many parents who are responsible for the cost of childcare. Though the credit is geared toward working parents or guardians, taxpayers who were full-time students or who were unemployed for part of the year may also qualify