This tax season, we have significant changes related to education expenses.

In prior years, taxpayers were entitled to a $2,000 tuition tax credit for the first two years at a community college or university. For the remaining years of college and graduate school, they were eligible for the Lifetime Learning Credit (which was usually less than $2,000).

After hearing taxpayer complaints that college student pay more than just tuition, Congress and the IRS made adjustments to the tax code. For tax years 2009 and 2010, students may receive a Hope tax credit for tuition, fees and education materials, such as books, calculators and lab materials.

The Hope tax credit increased to $2,500 and is available for the first four years of school. Additionally, the Lifetime Learning Credit includes educational material.

Last but not least, students still may deduct up to $4,000 in education expenses from their income if they elect not to take the Hope or Lifetime Learning credit.

Taxpayers are advised to maintain good records. For three years, they should retain receipts, bank statements, and credit card statements relating to education expenses.
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Email Rashad Phillips at phillipstaxg@aol.com. To receive free tax tips, visit his Web site at www.rashadphillips.com or Phillips Tax Tips (on Facebook).
 

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