Tax Benefits for Education DALLAS – The price of higher education can be expensive for students and parents. The IRS offers these tips about education tax benefits that can help offset some college costs. Tax credits, deductions and savings plans can help taxpayers with their expenses for higher education. A tax credit reduces the amount of income tax you may have to pay, and a deduction reduces the amount of your income that is subject to tax, thus generally reducing the amount of tax you may have to pay. “Often, tax credits are more valuable, because they reduce the amount of tax owed,” said Clay Sanford, an IRS spokesman in Dallas. “Deductions reduce the income on which tax is figured.” American Opportunity Tax Credit (AOTC): This credit can be up to $2,500 per eligible student. The AOTC is available for the first four years of post secondary education. Forty percent of the credit is refundable. That means that you may be able to receive up to $1,000 of the credit as a refund, even if you don’t owe any taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment. A recent law extended the AOTC through the end of Dec. 2017. Lifetime Learning Credit (LLC): With the LLC, you may be able to claim up to $2,000 for qualified education expenses on your federal tax return. There is no limit on the number of years you can claim this credit for an eligible student. You can claim only one type of education credit per student on your federal tax return each year. If you pay college expenses for more than one student in the same year, you can claim credits on a per-student, per-year basis. For example, you can claim the AOTC for one student and the LLC for the other student. “Use the IRS’s Interactive Tax Assistant tool on IRS.gov to help determine if you’re eligible for these credits,” Sanford added. “The tool is a tax law resource that takes you through a series of questions and provides you with responses.” Student loan interest deduction: Other than home mortgage interest, you generally can’t deduct the interest you pay. However, you may be able to deduct interest you pay on a qualified student loan. The deduction can reduce your taxable income by up to $2,500. You don’t need to itemize deductions to claim it. These education benefits are subject to income limitations and may be reduced or eliminated depending on your income. For more information, visit the Tax Benefits for Education Information Center at IRS.gov. Also, check Publication 970, Tax Benefits for Education. The booklet’s also available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Additional IRS Resources: · Tax Benefits for Education Information Center · Am I Eligible to Claim an Education Credit? – Interactive Tax Assistant tool · Publication 970, Tax Benefits for Education
Posted on: Sat, 20 Sep 2014 03:38:20 +0000
Trending Topics
Recently Viewed Topics
© 2015