The beginning of the year 2013 marks tax season for most. Accountants get busier, W-2’s start to arrive in the mail and people start thinking about tax credits and deductions that they qualify for. There are advantages that have been announced recently, about tax credits and deductions for costs of a college education. Tax breaks can provide a variety of tax incentives for students and families who are saving for, or are already paying higher education costs or are repaying student loans.
There is no questioning the benefits of a college degree from a reputable school such as Linfield College Adult Degree Program. Those who hold a degree are more likely to earn a better-than-average income and have the satisfaction of being more competitive in the job market with the attainment of their college education. This being said, higher education contains significant costs and for those adults looking to complete a degree while maintaining a family, career and busy life, any breaks can help.
Below are some of the most popular tax credits and deductions that students can take advantage of while in school or after graduation.
Breaks for Paying
American Opportunity Credit.Students are eligible to claim up to $2,500 for the first four years of post-secondary education and many will receive this full amount. Tuition and fees, course related books, supplies and equipment all qualify for this credit. The full credit is available to individuals whose modified adjusted gross income (MAGI) is $80,000 or less, or for couples filing jointly who earn less than $160,000.
Lifetime Learning Credit. For the tax year, you may be able to claim a lifetime learning credit of up to $2,000 for qualified education expenses paid for all students enrolled in eligible educational institution such as Linfield’s Adult Degree Program. There is no limit on the number of years the lifetime learning credit can be claimed for each student. The lifetime learning credit may be particularly helpful to graduate students, students who are only taking one course and those who are not pursuing a degree. For students earning less than $60,000 (single-filers) or $120,000 (married, filing jointly), they can claim up to $2,000 in education-related expenses.
Tuition and Fees Deduction
Students may be able to deduct qualified education expenses paid during the year for yourself, your spouse or your dependent. This deduction is not applicable if your filing status is married, filing separately or if someone can claim you as a dependent. The qualified expenses for this deduction must be for higher education.
The tuition and fees deduction can reduce the amount of your taxable income by up to $4,000. You can claim this deduction even if you do not itemize deductions. This deduction may beneficial you if you cannot take the lifetime learning credit because your income exceeds the limit.
Break for repaying loans
Student loan interest deduction: This tax break allows people repaying college loans to write off as much as $2,500 in interest costs, but starts to phase out for those earning more than $60,000 when single or $120,000 when married. It’s gone completely once adjusted gross income exceeds $75,000 single or $150,000, when married, filing jointly.
“Understanding how tax credits and deductions can benefit you is part of financial literacy. For students who want to pursue a finance related career, the degrees in Accounting and in Management offered online by Linfield’s Adult Degree Program enable you to seek professional positions in accounting and financial services,” stated Janet Gifford, Associate Director.
While these student tax breaks may be available to most students, keep in mind that you cannot take all of them. The IRS states, “You may be able to take one of the education credits for your education expenses instead of a tuition and fees deduction. You can choose the one that will give you the lower tax.”
You can find more detailed information on the IRS website http://www.irs.gov/uac/Tax-Benefits-for-Education:-Information-Center and other trusted sources on the web, and from the Linfield College Office of Financial Aid.