Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Education Credits

Summary and Exercises

Summary

You are now ready to help taxpayers determine which education benefits are best for them. When you get to this section of the return, always review the intake and interview sheet and ask probing questions based on the taxpayer's information and the rules for claiming education credits.

There are two education credits that may reduce a taxpayer's tax:

  • American opportunity credit
  • Lifetime learning credit

Education expenses can be applied to those credits, deducted as tuition and fees, deducted on Schedules C and C-EZ, or itemized on Schedule A. Choose the method that will give the taxpayer the lowest tax. The American opportunity credit can be claimed for students in their first four years of college and may be more beneficial than the lifetime learning credit. Remember, 40% of the American opportunity credit is a refundable credit, which means taxpayers can receive up to $1,000 even if they have no tax liability.

One of your roles as a volunteer is to help taxpayers maximize the available benefits. Compare the tax effects of the various education benefits and show taxpayers how they can use their education expenses to lower their tax.