If you attended undergraduate, graduate, or professional school this year, you may be eligible for a tax break. Tax credits and tax deductions may help you pay less income tax, according to the IRS. Tax credits are subtracted directly from the amount you owe in taxes on a dollar-for-dollar basis, while tax deductions reduce your taxable income.
There are a few tax deductions and tax credits available for students that may help offset the cost of tuition of other school-related expenses. You can use these credits and deductions for yourself, if you’re currently a student, or for your spouse or a dependent child if they are the one in school. College students can only claim one tax credit a year, but parents supporting more than one child in college can claim tax credits on a per-student basis.
American Opportunity Credit
With the American Opportunity Tax Credit students are eligible to claim a credit of up to $2,500 for the first four years of post-secondary education for tuition and fees, course-related books, supplies, and equipment. Couples filing jointly whose adjusted gross income (AGI) is less than $160,000 and single filers whose AGI is less than $80,000 are eligible. And since 40% of the credit is refundable, that means students can get back up to $1,000 on their refund — even if they don’t owe any taxes, according to the IRS
Lifetime Learning Credit
The Lifetime Learning Tax Credit allows students earning less than $67,000 (single-filers) or $134,000 (married, filing jointly) to claim up to $2,000 for education-related expenses.
Student-loan Interest Deduction
If you’ve taken out a federal or private student loans, you may be eligible to deduct up to $2,500 worth of interest paid on the loan as an “above-the-line” exclusion from your income. You don’t have to itemize your deductions in order to claim it. Students with a modified adjusted gross income (MAGI) less than $80,000, or $160,000 if filing jointly, are eligible.
Considering the high cost of education, make sure you get any tax benefits available. To make sure you are using the tax code properly consulting a tax professional is suggested. If you have student loans you should also consult your Certified Financial Planner to understand how repayment affects the success of your financial plan and what repayment strategy is best suited for your personal situation.
Any tax advice contained herein is of a general nature. Further, you should seek specific tax advice from your tax professional before pursuing any idea contemplated herein.
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