Tax Breaks for College Students (and Their Parents)
"With the national student debt already past the $1 trillion-dollar mark, we figure now is a good time to revisit some of the most lucrative tax breaks out there for college students," The Fiscal Times reports. First is the American Opportunity Credit, under which students "are eligible to claim up to $2,500 for the first four years of post-secondary education. And since 40 percent 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." Other tax breaks include the Lifetime Learning Credit that allows students "earning less than $60,000 (single-filers) or $120,000 (married, filing jointly) [to] claim up to $2,000 education-related expenses," and the student loan interest deduction, where students who have taken out federal or private student loans are "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." The final tax break is the tuition and fees deductions. "Like the American Opportunity Credit, students earning less than $80,000 (single) or $160,000 (married, filing jointly) can deduct up to $4,000 in tuition and fees on their annual tax returns. Use it while you can –– this tax break is set to expire at the end of 2013, unless lawmakers extend it."
Detailed information on educational tax benefits is available from the IRS (including the link noted below) or from financial advisors.
2012 Tax Year - Federal Tax Benefits for Higher Education