Taxpayers who pay for college in 2016 may receive tax savings on their federal tax return. These credits are available for study abroad education, too. Education credits are subject to income limitations and may be reduced or eliminated based on the taxpayer’s income.

Taxpayers may only use qualified expenses to figure their education credit. Qualified expenses include the costs paid for tuition, fees and other related expenses for an eligible student to enroll at, or attend, an eligible educational institution. Items such as computers, books, and other school supplies can also be claimed as qualified education expenses. Items such as room and board, insurance, and transportation cannot be claimed as qualified education expenses. For more information about qualified expenses, click here.

Eligible educational schools are institutions that offer education beyond high school. This includes most colleges and universities. Vocational schools or other postsecondary schools may also qualify.

The American Opportunity Tax Credit is worth up to $2,500 per year for an eligible student and it is available for the first four years of higher education.

Most taxpayers don’t know that 40% of the American Opportunity Tax Credit is refundable. This means up to $1,000 of the credit could be refunded, even if no tax is owed and the taxpayer is eligible for a refund. Taxpayers claiming college students as dependents should check with a tax professional to see if it’s more beneficial to claim the education credit for their dependent or if the dependent should claim the education credit for theirselves.

The Lifetime Learning Credit is worth up to $2,000 per tax return. There is no limit on the number of years that taxpayers can claim the Lifetime Learning Credit for an eligible student.