• Tax credits are available to ease the burden of college expenses.confused college student 2 image by visi.stock from Fotolia.com
  
  While the calendar continues to move forward, people must think about possible tax credits they may qualify for. Tax credits offer a higher benefit to the taxpayer than tax deductions do. A tax deduction reduces the taxable income, which is then used to calculate the tax amount owed. A tax credit reduces the final tax amount directly.
  
  

American Opportunity Tax Credit

• The American Opportunity Tax Credit offers relief for college students and their parents. The credit consists of two parts. The first part equals the first $2,000 of qualified college expenses that have been paid in the calendar year. The second part equals 25 percent of the next $2,000. The maximum credit amount is $2,500. This credit is prorated for individual taxpayers who have taxable income above $80,000. A percentage of this credit is refundable. A refundable credit can be received by the taxpayer even if the taxpayer did not owe any tax. This credit is currently available through December 31, 2010.
  
  

Retirement Savings Contributions Credit

• The Retirement Savings Contribution Credit was created to encourage lower income workers to save for retirement. Single individuals can claim up to a $1,000 tax credit equal to fifty percent of the amount they contribute to a retirement savings account. To receive the maximum credit, individuals must have adjusted gross income of $16,500 or less. For incomes above $16,500 but less than $27,750, the percentage of the credit is reduced. The income limits for married couples is double those of single taxpayers. This credit is also known as the Saver's Credit.
  
  

Energy Efficiency Credits

• Home improvements that include helping your home utilize renewable energy or purchasing an energy-efficient appliance may qualify for tax credits. These include installing insulation, reroofing the house, replacing water heaters, adding solar energy systems and more. It is important to note that not all home improvement projects will qualify. You should verify the requirements of these projects regarding tax deductibility. The tax credit is equal to 30 percent of the cost up to $1,500 for most items. Installation of geothermal heat pumps, small wind turbines or solar energy systems do not have a limit. This credit expires December 31, 2010.