The cost of education is frankly frightening. Today a year at a private college runs an average of $26,000, a price that promises to keep edging upward, even if the economy doesn’t follow suit. Offsetting these costs is more important than ever and one place where savings are hiding is the tax code. Whether you’re eyeing a master’s degree, paying off student loans or trying to get ahead of the curve by saving for your child’s education now, the government offers a number of incentives to lighten the load.
American Opportunity Credit
Part of the 2009 American Recovery and Reinvestment Act, the American Opportunity Credit is an expanded version of the former Hope Credit. It’s worth up to $2500 per student for expenses paid during the first four years of college, vocational school or other eligible educational institution. In addition to tuition and fees it covers course materials like books, art supplies, and protective lab gear. To be eligible for the full credit filers must have an adjusted gross income of no more than $80,000 ($160,000 if filing jointly); after this point the value declines until it is eventually phased out.