Using a College Tuition Credit Explained


The video talks about college tuition as it pertains to tax deductions. The speaker discusses the two main ways a person can use the money spent on his or her college tuition to get a break on taxes.

The Hope credit is one way to get a tax break for college tuition expenses. The Hope credit depends on the person’s adjusted gross income. This credit is a true tax credit and not a deduction.

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A tax credit takes a dollar-for-dollar amount of the taxes that a taxpayer owes. The maximum amount of Hope credit one can claim is $1,650 for each eligible dependent. There is a two-year limit on the Hope credit. Therefore, the taxpayer cannot use the credit after the first two years of the qualifying dependent’s schooling.

The second type of tuition tax credit a taxpayer can use is the Lifetime Learning credit. This credit does not have a two-year limit on it. It works a little bit differently than the Hope credit works. Taxpayers can deduct 10 percent of the first $10,000 spent on tuition, with a maximum allowable credit of $2,000. Neither one of these credits is refundable. That means they will reduce the amount of taxes a taxpayer must pay, but they will not leave the individual with a refund in the end.

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