What about College Tuition Tax Breaks for Dual Credits?

Are there any tax breaks for homeschoolers in South Carolina? The short answer is no. What about college tuition tax breaks for Dual Credits? Can you count those tuition dollars off on your taxes? Well, yes–and no.

American Opportunity Credit and Lifetime Learning Credit are tax breaks toward college tuition--and can even be counted for dual credits. But, should you take that tax credit or not? Disclosure Policy

No Tax Breaks–No Gub’ment Money

It’s that time of year again, when the topic of discussions turn to tax breaks for home education.
We have taken on the burden of responsibility for educating our children, so many homeschoolers would like to get a little help by means of a tax break or tax credit. But many homeschoolers remain skeptical of *any* monetary funding from the government.

It’s our collective distrust of the government. It’s our suspicion that there’s bound to be strings attached. So we don’t have any tax breaks for homeschool education in South Carolina. Read more about Tax Breaks, Funding and Homeschoolers, Oh My!

College Tuition Tax Breaks

But, what about homeschoolers doing Dual Enrollment? College tuition *can* count on your taxes. But, the real question is whether or not you should count it toward high school credits. It’s legal to do so, but it’s not necessarily advisable.

Whether or not your state has tax breaks or credits for home education…there is a federal tax break for college tuition. If you’re doing your own taxes, it’s hard to figure out if you should take that credit or not.

I recently heard of this secret tax break from a friend. As I listened to her explain it, it sounded too good to be true. So, I set out to find out more about it. What she’s talking about is the American Opportunity Credit.


American Opportunity Credit

Here’s how it works: The college issues a form 1098T. Then, you can use that information to claim up to $2,500 per year of undergraduate. It reduces your federal tax dollar-for-dollar and you can claim $10,000 over four years.

Seems like a great idea since those college credits are expensive. Even if your student qualifies for the lottery assistance, it’s still a chunk of change that would be nice to get back at this point.
 
Right. So what’s the catch?
The catch is the four year limit to claim this AOC tax break. The tax form or accountant should actually ask you if you have claimed it already and for how many years have you claimed it. Your student has to be attending at least 1/2 time to qualify for it.
But, if you’re only doing 1/2 time or so for the high school dual enrollments, you will not be able to get it when the student is full time senior in college. You don’t have to take the four years consecutively. But, once you’ve used up the four years–that’s all there is of that tax credit.

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Lifetime Learning Credit

After four years, the 1098T defaults to Lifetime Learning Credit which is 20% of the tuition up to $2,000. So the 20% tax credit as a full-time college student might not be worth taking that dollar-for-dollar tax credit in high school. You see?

Yes, you can claim your tuition expenses on your taxes. But, it might be worth waiting to take later, if the tuition expenses will be higher in college. That full-time college expense could actually be affordable with the scholarships and Pell Grant money that’s not available for high schoolers doing dual credits.

Possible Scenario when you might want to get the tax break now:
Since the American Opportunity Credit does not have to be used in consecutive years…you could use it for a year or two of high school dual credits. Say your student goes to a technical college where the tuition is lower for Freshman and Sophomore years.  If the student gets Life scholarship and Pell grant money to cover their tuition, you wouldn’t need the tax break for those years. Then, when your student transfers to a 4-year college, the Life scholarship and Pell grant money don’t fully cover that tuition–you could apply the American Opportunity Credit again for those years.

Possible Scenario when you might want to wait for the tax break later:
On the other hand, if your student is aiming toward a 4-year college as a freshman, those tuition rates are higher. Scholarships and grants don’t go as far, and the dollar-for-dollar tax break will be much more important then. Or if your student is going on grad school, those dollar-for-dollar tax credits can be used, if it hasn’t already been claimed four times.

Hope that helps you decide what to do about the tax credit for the college tuition. I personally think that going to Tech for freshman and sophomore years is a great way to go. But, plans change and kids change their minds–so it’s a decision about which doors of opportunity to use now or keep open for the future.

Would you use the tax credit for dual enrollment credits? 
Let me know in the comments–why or why not. 

Read more about Tax Breaks for homeschoolers


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