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02/26/2013

Education Expense Relief

The new tax law package has some good news for families who are seeking tax relief for education expenses.

The American Opportunity Tax Credit, a refundable tax credit for undergraduate college expenses, has been expanded for another 5 years to 2017.  This credit provides up to $2,500 on the first $4,000 of qualified education expenses.

Holding booksCoverdell Education Savings Accounts (aka Education IRAs) have been made permanent and now allow higher contribution limits of $2,000 a year.  Money in these accounts grows tax-free and is tax-free when withdrawn if used for eligible education expenses. You can make 2012 contributions through April 15, 2013. 

The Lifetime Learning Credit is available for anyone who is taking a college course.  It allows a nonrefundable tax credit on eligible expenses even if you are only taking one class.  Parents or the student may be able to claim up to $2,000 of qualified expenses.  There is no limit on the number of years the credit can be claimed. 

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