Headed off to college? Check out the IRS Tax Benefits for Education: Information Center
A special CONGRATULATIONS to my daughter who graduates from high school today with high honors and from the Scholars Program at Christian Brothers High School. She will attend UCLA in the fall.
A tax credit reduces the amount of income tax you may have to pay.
A deduction reduces the amount of your income that is subject to tax, thus generally reducing the amount of tax you may have to pay.
Certain savings plans allow the accumulated earnings to grow tax-free until money is taken out (known as a distribution), or allow the distribution to be tax-free, or both.
An exclusion from income means that you won't have to pay income tax on the benefit you're receiving, but you also won't be able to use that same tax-free benefit for a deduction or credit.
See IRS Publication 970, Tax Benefits for Education (PDF) for details on these benefits, including an appendix with an illustrated example and a comparison chart of the various benefits.
An education credit helps with the cost of higher education by reducing the amount of tax owed on your tax return. If the credit reduces your tax to less than zero, you may get a refund. There are two education credits available: the American Opportunity Tax Credit and the Lifetime Learning Credit.
Am I eligible to claim an Educational Credit?
Click here: https://www.irs.gov/help/ita/am-i-eligible-to-claim-an-education-credit
For more information: