The Hope and Lifetime Learning tax credits are great tax savers, but people with high-income can’t take advantage of them because of the phase-out rules. These rules do exactly as they say, phases out your tax credits as your income increases! If your income pushes you over those phase-out limits, you may want to let your dependent college students claim themselves on their tax return and take the valuable credit instead. This may not cost you anything if your income is high enough; the phase-out rules most likely are phasing out your exemptions already! This of course assumes your college student has taxable income. Remember this tax credit is not refundable! It can only reduce the income tax you owe to zero.
Any tax advice in this blog is general in nature and may not be appropriate for you. Be sure to speak to your tax advisor for specific advice for your situation in writing.
