How to Save Money on Your Kid's Tuition

The Hope and Lifetime Learning Credits

The Hope Credit is a tax credit for college students in their first two years of post-secondary education, such as college or vocational school. The maximum credit is $1,650 on the first $2,200 of tuition and fees.

This credit does not apply to graduate and professional-level programs, and the student must be enrolled at least part time to qualify.

The Lifetime Learning Credit, on the other hand, is for anyone who takes college classes. That means that if you, your spouse or your dependents are enrolled at an eligible educational institution and you are responsible for paying the expenses, you can take this credit.

And the upside here is that the credit not only applies to undergraduates, it will work for graduate and professional degree courses too. Better yet, you don't need to be a full-time student. So if you decided to go take one class at a local college to improve your current job skills, you could take advantage of this credit. The maximum tax credit here is 20% on the first $10,000 of college tuition and fees, or $2,000.

However, on both the Hope and Lifetime Learning credits, there are income limitations. The amount of these credits is phased out when your adjusted gross income hits $90,000 for those filing jointly ($45,000 for individuals) and then eliminated completely when your AGI reaches $110,000 ($55,000 for individuals).