How Do Education Tax Credits Work?
Because it’s tax time, you may have major questions about the STO tax credit and other educational tax credits. If your child is dependent on your taxes, you could absorb an amount of their tuition, up to $2,500, on your taxes, but you will need to observe some rules.
The easiest tax credit to claim is the American Opportunity Tax Credit. The American Opportunity Credit is a credit for qualified educational expenses paid for yourself, your spouse, or a dependent child for up to 4 years of undergraduate education.
The AOTC is a tax credit on the part of undergraduate education that is the college tuition only and not room and board. For almost all colleges, the cost of tuition is going to be greater than the $2,500 maximum of the AOTC.
One of the tricky parts of the American Opportunity Tax Credit is that it is only available for four years, while your child will be in school for five tax years since the school year does not perfectly coincide with the tax year. This means that in the spring semester of your final year, the AOTC won’t be available. Save some money on your taxes with this credit.
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