Tax breaks for education expenses are better than ever.  Depending on the type of educational expense you have and your income level, you can now benefit from 4 different deductions and credits that are available for students:

• The American Opportunity Credit is worth up to $2,500 per student of the cost of tuition and related expenses.
• The Lifetime Learning Credit offers savings for graduate students and students who are attending individual courses

American Opportunity Credit

This new credit modifies the existing Hope Credit for tax years 2009 through 2012 and brings tax breaks to a broader range of taxpayers, including many with higher incomes and those who owe no tax.  For the first time, it is now possible to include the cost of course materials and books. 

The American Opportunity Credit can be claimed for up to four post-secondary education years instead of two. The maximum credit per student is $2,500 and up to $1,000 per student is refundable even if you owe no tax. 

To claim this credit you or your dependent must:

• Be enrolled in a degree program or a program that will lead to a recognized credential
• Must not have completed a Bachelor's program in a prior year.
• The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels. 
• The student must not have a felony drug conviction.

Tuition and Fees Deduction

This deduction is available on both the federal and Oregon returns.  It allows filers to claim an "above-the-line" deduction for qualified educational expenses.

Generally, you can claim the tuition and fees deduction if all three of the following requirements are met:

• You pay qualified education expenses of higher education.
• You pay the education expenses for an eligible student.
• The eligible student is yourself, your spouse, or your dependent for whom you claim an exemption on your tax return.

You cannot claim the tuition and fees deduction if any of the following apply:

• Your filing status is married filing separately.
• Another person can claim an exemption for you as a dependent on his or her tax return. You cannot take the deduction even if the other person does not actually claim that exemption.
• Your modified adjusted gross income (MAGI) is more than $80,000 ($160,000 if filing a joint return).

Lifetime Learning Credit

This credit provides a tax break for students who may not qualify for the American Opportunity Credit or the Hope Credit.  The maximum amount of the credit is generally $2,000 per year regardless of the number of students.

• You can claim the credit regardless of the number of years you have attended school.
• You can claim the credit if you attend only one class during the year.
• The full credit is available to individuals whose modified adjusted gross income is $60,000 or less, or $120,000 or less if married filing a joint return.

Job-Related Education

Did you pay educational expenses to maintain or improve job skills?  If so, you may be able to claim the cost of tuition, fees, supplies, transportation and other expenses as an itemized deduction on Schedule A.

• The education must be work-related and cannot qualify you for a new career.
• Income limits do not apply to this deduction, however, the cost of education combined with other work-related or miscellaneous expenses must exceed 2% of your adjusted gross income for the year.