Teresa Bolton, Licensed Taxpayer Representative
Fall is here and classes are back in session everywhere. I thought this would be the perfect time to offer some helpful tax tips to college students and recent graduates.
When it comes to saving money on higher education, did you know you have several options? The amount of the available credits and deductions is based on the qualified education expenses, such as college or vocational school tuition and enrollment fees, that you paid during the year and may be limited to your modified adjusted gross income. It is important to remember room, board, transportation, insurance or personal living expenses are not considered qualified education expenses.
Evaluate the following credits and deductions to determine which might be applicable to you:
· The Hope Credit – Up to a $1,650 tax credit per student per year, the Hope Credit is available only for the first two years of college or vocational school. You can claim this credit if you are enrolled in a program that leads to a degree, certificate, or other educational credential. The Hope Credit also requires that you take at least a half time load of courses for your major in at least one academic period beginning during the calendar year. The Hope Credit can be used for school tuition and required fees, minus any tax-free grants or scholarships.
· The Lifetime Learning Credit – Up to a $2,000 tax credit per year, the Lifetime Learning Credit applies to undergraduate, graduate or professional courses. There is no limit on the number of years that you can take this credit.
· The Tuition and Fees Deduction – This deduction can reduce taxable income by up to $4,000. Qualifying expenses are the tuition and fees required for enrollment or attendance at an eligible college, university or vocational school. It is important to remember, this deduction cannot be used in the same year as either the Hope or Lifetime Learning Credits.
· Student Loan Interest Deduction – You may be able to deduct up to $2,500 in interest paid on student loans yearly. To qualify, you must have used the money from your student loans for qualified higher education expenses such as: room and board, tuition, fees, supplies, etc. This deduction can be claimed with any of the other credits or deductions.
I hope this information is helpful to as you head back to school this fall. If you would like to check out more information on this topic, there are some excellent resources on the web. Check out www.irs.gov or www.collegeanswer.com/paying/content/pay_tax_benefits.jsp.