You don’t have to be a CPA to understand how to get the most out of education tax credits. When you’re a student, every dollar counts, and you need all the help you can get to stretch your budget. Here’s an easy guide to navigating higher education tax credits, either to help shrink your bill at the end of the year, or to help bump up your refund:

American Opportunity Credit

The American Opportunity credit will temporarily replace the Hope Credit through the 2010 tax year. This credit is subtracted from the tax you owe instead of from taxable income — meaning more money back in your pocket. You can claim a $2,500 credit for each eligible dependent for four years of postsecondary education. That means that most graduate candidates can’t take advantage of the credit. Students must be pursuing an undergraduate degree or other education credential, and must be enrolled at least half time for one academic term. Students cannot have a felony drug conviction and receive the credit.

The credit allows you to claim:

100 percent of the first $2,000 of qualified education expenses
25 percent of the next $2,000 of qualified education expenses

You cannot claim the credit if:

Your filing status is married, filing separately
Your modified adjusted gross income is $90,000 or more for a single taxpayer, $180,000 or more for married taxpayers filing jointly
You or your spouse were a nonresident alien for any part of 2009

If you family owes less in taxes than the maximum amount of the credit for which you are eligible, you can still receive a refund of up to 40 percent of the amount of the credit for which you are eligible, up to $1,000.

Hope Credit

You can claim up to $1,800 for expenses paid in a student’s first two years of college — $3,600 for students attending school in a Midwestern disaster area. The credit cannot be taken in conjunction with the American Opportunity credit. Students must be enrolled at least half time, and qualified expenses include tuition, books, required fees, room and board. You can claim the credit a maximum of two years.

You cannot claim the credit if:

Your filing status is married, filing separately
Your modified adjusted gross income is $60,000 or more for a single taxpayer, $120,000 or more for married taxpayers filing jointly
You or your spouse were a nonresident alien for any part of 2009

Lifetime Learning Credit

The Lifetime Learning credit is another credit that is subtracted from the taxes you owe, rather than reducing taxable income, and allows taxpayers to claim a credit of up to $2,000 per tax year, or up to 20 percent of the first $10,000 of qualified education expenses. The Lifetime Learning credit is available for postsecondary education and courses to acquire or improve job skills, and it is available for an unlimited number of years. Students do not have to be pursuing a degree to receive the credit, and there are no requirements for course load (one or more courses are acceptable). A felony drug conviction restriction does not apply.

This credit is family-based (up to $2,000 per tax return).

The same restrictions apply for claiming the credit as for the American Opportunity/Hope Credits.

To apply for either credit, families must report all expenses paid for education, minus any scholarships or other assistance, and must submit a form 1098-T, which will be provided by the institution. You cannot apply for both credits in the same year. The credit is nonrefundable — meaning that if you owe fewer taxes than the full amount of the credit for which you are eligible, you will not receive the full amount of the credit.

Student Loan Interest Deduction

You can reduce the amount of your income subject to tax by up to $2,500 of interest paid on student loans for higher education. This will lower the amount of tax you owe. The deduction includes required and voluntary interest payments.

You cannot claim the deduction if your filing status is married, filing separately, or if your modified adjusted gross income is between $60,000 and $75,000 (or $120,000 and $150,000 if married, filing jointly).

Tuition and Fees Tax Deduction

You can also reduce the amount of your income subject to tax by as much as $4,000 per year for any tuition and fees paid for attendance at an eligible postsecondary institution. This deduction can be claimed even if
you do not itemize your deductions. You cannot deduct expenses for personal or living expenses, including room and board, insurance, health care and transportation.

You cannot claim the deduction if your filing status is married, filing separately, or if your modified adjusted gross income is $80,000 or more ($160,000 or more for married, filing jointly).

You can claim this deduction along with the American Opportunity/Hope credit or the Lifetime
Learning credit as long as they are not for the same student. You cannot claim the deduction if the tuition or fees were paid with a scholarship or grant.

Coverdell Education Savings Account

This account is a savings account used to help pay education expenses. The account must have been established for a child before the age of 18. Contributions are tax free, and the account can later be used to pay for qualified education expenses so long as the student is enrolled at least half time.

To qualify for the account, your modified adjusted gross income must be less than $110,000 for a single taxpayer or $220,000 for married taxpayers filing jointly.

The total of all contributions cannot exceed $2,000 per child per year, and contributions cannot be made after the child turns 18.

529 College Savings Plans (Qualified Tuition Programs)

You can set up a qualified tuition program to prepay for or contribute to a student’s qualified education expenses for an eligible institution. Payments or contributions to these accounts is not deductible.