In this video, the host walks viewers through how to reduce the cost of higher‑education expenses using U.S. tax benefits. He first defines eligible expenses (tuition, required books, supplies, equipment) and clarifies that grant or scholarship money does not count. He then explains two primary education tax credits: the Lifetime Learning Credit (20 % of up to $10,000 in expenses, max $2,000, non‑refundable) and the American Opportunity Credit (100 % of the first $2,000 plus 25 % of the next $2,000, max $2,500, partially refundable up to $1,000, limited to the first four years of post‑secondary study). The host emphasizes that a taxpayer can claim only one credit per student and that credits are generally more advantageous than a simple deduction. He also covers the student‑loan interest deduction (up to $2,500 of interest, phased out for single filers above ~ $70k and joint filers above ~ $145k). Finally, he discusses strategic considerations for self‑employed professionals, suggesting that business‑related education expenses may be treated as business deductions, but that education credits are usually superior; for high‑earning professionals (e.g., doctors, dentists) he recommends using business loans to pay off student loans to avoid the interest‑deduction phase‑out. Throughout, the presenter adopts an informal, promotional tone, urging viewers to like, subscribe, and share the information.
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Welcome to the channel. Please remember to like and subscribe. It is super helpful for us. Today, let's talk about how expensive college is. Now, I'm not going to talk about the debate whether at this point sending our kids to college or going to college ourselves makes sense based on how expensive it is. And how literally every time they increase how much you can take in student loans, colleges increase their tuition. We're not talking about the debate of is college a scam or not. Let's talk about how you write it off. So the decision was made at some point, you're going to college or you're paying for college and you're taking out loans or you're just paying for it out of your pocket. Or you're covering your kids' tuition, you're taking loans out for them, whatever the scenario, if you have what they call higher education expenses, or sometimes post-secondary expenses, how do you maximize the tax benefit? So let's first define what's an eligible expense, and then we'll talk about 2 good credits that you should consider. And then student loan interest. So, what are eligible expenses? Tuition, obviously, but then also, if I have to pay for books, which are required for classes, if supplies are required, or if equipment is required, then those are eligible expenses for the credits that I'm about to talk about. It's important to note the exception, Grants, like Pell Grants and scholarships, any use of those funds, that doesn't count. That's not what we're talking about. We're talking about if you borrowed money or you're paying for this stuff out of pocket, not using grants or scholarship money to cover those expenses. Okay, so let's first talk about the Lifetime Learning Credit. Now, this credit is, Whether you're a part-time student or full-time student, and it doesn't matter where you're at in your journey of post-secondary education— freshman, sophomore, grad student— it doesn't matter. You can qualify for the Lifetime Learning Credit. The credit is calculated— it's 20% up to $10,000 of expenses. So the credit does max out at $2,000. But so if I say, for example, I spent $5,000 in those eligible expenses, 20% of that would be $1,000. So that's a $1,000 credit. And I guess I should pause here because both of the things I'm talking about are credits. A credit is different than a tax deduction. A tax deduction reduces your taxable income. A credit is directly applied to the amount that you owe. So let's say I owe $2,000 in taxes and my Lifetime Learning Credit is $2,000. I actually will pay $0 out of pocket because the credit will match the amount I owe dollar for dollar. Also, with the Lifetime Learning Credit, it is not refundable. So let's say I owed $500 in taxes and I have a $2,000 credit, I will end up owing zero in taxes, but the other $1,500 is lost, basically. Okay, so that's Lifetime Learning. $2,000 max. It's 20% of your eligible expenses. The next one is the American Opportunity Credit. This one, you have to be more than a part-time student. So you could be 3/4, you don't have to be full-time per se, but the rules are more than part-time. This is a better credit because it's 100% of the first $2,000 you spend plus 25% of the next $2,000 you spend. So the American Opportunity Credit max amount is $2,500, and it maxes out after only $4,000 of eligible expenses. Right, where the Lifetime Learning Credit is 20% and it maxes out at $10,000. So you get more bang for your buck with American Opportunity Credit. However, it is only eligible for your first 4 years of post-secondary education. So think freshman through senior year of college. American Opportunity Credit's the way to go. After those first 4 years, then you're looking at the Lifetime Learning Credit. Now, The also good thing about American Opportunity Credit is part of the credit is refundable. So up to $1,000 of this credit is refundable. What that means is, let's go back to some of the examples we talked about. So in this case, if I had $5,000 of eligible expenses, or even $4,000, I've maxed out the credit. So I have a $2,500 credit. If I owed $2,000 in taxes and I have a $2,500 credit, so the first $2,000 offset my tax amount owed down to zero. The other $500 of the credit gets refunded to me, so the government is actually going to give me back $500. So that can be maxed up to $1,000. So in this case, you know, if I owed $1,500 in taxes but I had a $2,500 credit, it gets offset, right? So I have $1,000 left over, that full amount would be refunded to me, the full $1,000. Hopefully that makes sense. All right, so that's Lifetime Learning American Opportunity Credit. You can claim either or, you cannot claim both. The best way to think about this is each student has a choice in how they write off their expenses for post-secondary, so for college and above. They can either take a Lifetime Learning Credit, they could take an American Opportunity Credit, or they just take a deduction on their tax return for the eligible expenses. Look, the reality is if you qualify for the credits, the credits are better, so you're going to take one or those. But I can't take the American Opportunity Credit And also take the Lifetime Learning Credit. It's one or the other. If I, if I have college expenses, if my spouse has college expenses, if my students have college expenses, each of us as a student can claim one of those things. Okay, but again, it's limited to the per student, but you can have multiple. So I could have, you know, if I'm a freshman in college and my spouse is a sophomore in college, And for some weird reason we also have a child who's in college, each of us would take one of those, we would each take the American Opportunity Credit. Okay, so those are credits on eligible expenses. You've, if you've borrowed money, you have student loan interest. The IRS does allow you to claim a student loan interest deduction. So up to $2,500 of your interest expense for student loans can be written off. Now that sounds great, and if you have it and you can take advantage of it, every dollar helps, right? However, the IRS says, yeah, but we're going to limit this. If you're single and you make more than about $70,000— now these numbers change every year, which is why I'm saying around $70,000, because you're gonna have to look up the current year actual dollar amount, but If you're around $70,000 as a single person or you're filing married jointly, you can have up to $145,000 of income. So if you're under those thresholds, you can claim the up to $2,500. Once you're over those thresholds, you very quickly aren't able to take the full deduction. So in my experience, the clients who have student loan interest that is $2,500 or more are also people who have a lot of student loans because they're doctors and dentists and lawyers. The people who've gone to school for, you know, 8 years or so, uh, they don't even get the benefit of the student loan interest because they make more income than that. So I just say that because it's another kind of an example there of how the government and the IRS suck and how they really try to screw you. Like, oh, let me pretend and kind of tell you to your face I'm giving you this benefit, but really those who actually need it or qualify with the $2,500 of student loan interest, they're not even going to be able to take it. So that is a good point though. If I'm self-employed and I'm taking on expenses to improve Myself, to improve my business, to give me more skill sets that improve my business, those are business expenses, and those should be taken as expenses. Now, if your education expenses are considered post-secondary education with a higher learning institute, then taking a credit for those expenses is better than taking the business expense. But, for example, for the dentists and the doctors, we actually recommend they take out a business loan because the business interest is not limited, and pay off their student loans with a business loan as opposed to just having something classified as a student loan. So I hope that helps. Remember, it's— we're talking about education expenses, Lifetime Learning, American Opportunity Credit, student loan interest, writing things off as a business, this is one of the best ways if you are taking on these expenses to at least minimize the cost. And remember, look, the IRS sucks, they're out to get you. If you found any of this valuable, please like, subscribe, share with others. We really want to get the word out. We like to save people money in taxes. Thanks for joining us today.
