If you were a college student or if there was a student in your family last year, you may be eligible for some valuable education related tax benefits on your 2015 tax return.

To max out your tax benefits, you need to see which ones you’re eligible for and then claim the one(s) that will provide the greatest benefit. In most cases you can take only one benefit per student, and, for some benefits, only one per tax return.

Education Tax Credits vs. Deductions

Tax credits can be especially valuable because they reduce taxes dollar-for-dollar; deductions reduce the amount of income that’s taxed. A couple of credits are available for higher education expenses:
The American Opportunity credit — up to $2,500 per year per student for qualifying expenses for the first four years of postsecondary education.
The Lifetime Learning credit — up to $2,000 per tax return for postsecondary education expenses, even beyond the first four years.
​But income-based phaseouts apply to these education tax credits.

If you’re eligible for the American Opportunity credit, it will likely provide the most tax savings. If you’re not, the Lifetime Learning credit isn’t necessarily the best alternative.

Despite the dollar-for-dollar tax savings credits offer, you might be better off deducting up to $4,000 of qualified higher education tuition and fees. Because it’s an above-the-line deduction, it reduces your adjusted gross income, which could provide additional tax benefits. But income-based limits also apply to the tuition and fees deduction.

How much can you or your family save?

Keep in mind that, if you don’t qualify for these tax benefits for your child’s higher education expenses because your income is too high, your child might. Many additional rules and limits apply to the education tax credits and deduction, however. To learn which breaks your family might be eligible for on your 2015 tax returns — and which will provide the greatest tax savings — contact our team of tax professionals.

For additional information on these education tax credits and deductions, check out this information from the IRS:
American Opportunity Credit
Lifetime Learning Credit
Tax Benefits for Education.

And for more tax-savvy ways to save on education, check out the 529 college savings plan.