How to Lower Education Costs via the IRS
If you are (or have) a student attending a four year university, you should know there’s a tax credit offered by the IRS that can offset expenses by as much as $2500 annually..
All those books, fees, supplies, etc that students need in their university careers can put a massive dent in your wallet. If you’re a student paying for your own education, you’ve probably felt this pain first hand, turning to secondhand supplies and online hacks for accessing course work just to cut a few dollars from your bill. As it turns out, the IRS has a program called the AOTC (American Opportunity Tax Credit) that helps cover these educational expenses, but you have to be eligible to apply.
American Tax Opportunity Credit (AOTC)
The AOTC is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. The credit covers up to $2500 worth of expenses annually, with 100% of the first $2000 and 25% for the next $2000, with a total not exceeding $2500. The AOTC is offered per-student, which might come as a blessing to families with multiple children attending university simultaneously. Here are the requirements for receiving the AOTC, as taken directly from the IRS website:
- Be pursuing a degree at an accredited university
- Be enrolled at least half time for one academic period beginning in the tax year
- Not have finished the four years of higher education at the start of the tax year
- Not have claimed the AOTC for more than four years
- Not have a felony drug conviction at the end of the tax year
- Your gross income must be less than $80,000 ($160,000 if married) per year
One of the other great things about the AOTC is that if the credit pays your tax down to zero, you can have 40% of the remaining amount (up to $1000) refunded to you, which is basically putting free money in your pocket. You can learn more about applying for the AOTC on the IRS website. BE SURE to read all the criteria and fine print prior to applying, to make sure you are eligible for this credit. I used the AOTC when I was working towards my BA and it helped a lot.
The AOTC is just one of many financial breaks offered by both federal and state governments for educational expenses. To find more opportunities to save, I suggest researching your local governments grant/scholarship options as well as federal programs like FAFSA if you haven’t done so already. For another education related tip, check out our Mod about how to bypass membership screens on articles online!
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