User:Educationtaxcredits

Overview of Education Tax Credits

What are Education Tax Credits?


 * Tax deductions reduce the income the government considers when calculating your tax liability. If you earn $50,000 and donate $5,000 to charity, then you subtract that from your total taxable income and the government only taxes you on $45,000. You don't get taxed on that $5,000.


 * Tax credits reduce a taxpayer's tax liability directly. Let's say you earn $50,000 and owe $2,500 in state income taxes (that's your tax liability). If you claim a dollar-for-dollar tax credit for spending $1,000 on charity, then you subtract that from your total tax liability and you only owe $1,500 in taxes.


 * Education tax credits allow individuals to use their own money to pay for the education of their children or to donate money towards the education other children.

What are the types of Education Tax Credits?


 * Personal Use Tax Credits: Tax credits given to individual taxpayers for education expenditures made on behalf of their own children. For families with a significant tax liability, parents can use their own tax liability to send their children to a private school or home school. For each dollar that individuals spend on education, tax credits reduce the amount of taxes that individuals must pay the government (tax liability). Say you send your child to private school and pay $3,000 for tuition. Your tax liability is $3,000, so you owe the government $0 in taxes ($3,000 owed in taxes - $3,000 credit = $0).


 * Donation Tax Credits: Tax credits given to individual taxpayers or corporations who donate to nonprofit organizations that give out private school scholarships to low income families. The same credit can be claimed for donations to scholarship organizations that help lower-income families that don't have large tax liabilities. Say you donate $3,000 to a scholarship organization that provides assistance to families who want to send their child to a private school. Your tax liability is $3,000, so you owe the government $0 in taxes.
 * Comprehensive Tax Credits: The two types of tax credits described above can easily be combined to cover all families--from low income up.