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Education Tax Breaks

Tax breaks to help you pay educational expenses are some of the most commonly overlooked federal tax breaks. They shouldn't be. Getting the most from the education tax incentives requires careful planning, particularly because of the interrelationship between many of the rules. Although the IRS provides guidance, some of the IRS' explanations have actually complicated matters in some circumstances. American Opportunity Tax Credit. The American Opportunity Tax Credit (AOTC) provides a maximum credit amount of $2,500 per year for four years of post-secondary education The AOTC is computed as 100 percent of up to $2,000 qualified higher education expenses plus 25 percent of the next $2,000 of e

Educational Credits and Deductions

The federal tax incentives for education include the American Opportunity and Lifetime Learning Credits, the student loan interest deduction, Coverdell education savings accounts, and others. They have very different criteria, but one or more could help you to maximize your tax savings. The most beneficial options will depend on your current and anticipated expenditures for higher education. Even if you or a dependent is not currently enrolled in a post-secondary school, it's important to start planning for that day. Some of the education tax breaks, such as Coverdell ESAs and 529 plans, allow you to save money today for future education expenses. With the costs of post-secondary education g