Save Money With Useful Tax Benefits for Students
With college tuition becoming more of a burden for students each year, the national student debt currently totals more than $1 trillion. Though a degree is more important than ever, for many students, another year of schooling can mean another year of loans and accumulating more debt.
Scholarships and DSST exams can help make college expenses more manageable, however many students aren’t aware that tax breaks and benefits can also contribute to less student debt. Below is a quick glimpse at some of the tax opportunities that students should know about.
American Opportunity Tax Credit: Get your refund! Students are eligible to claim up to $2,500 in tax credits based on their first $4,000 of educational-related expenses during their first four years of post-secondary education. Qualifying educational expenses include tuition and fees, as well as books and supplies. In addition, up to 40% of the credit is refundable, granting up to $1,000 of the American Opportunity Credit even if your tax liability is zero.
Lifetime Learning Credit: Students can claim a credit of up to $2,000 per year with the Lifetime Learning Credit. Unlike the American Opportunity Tax Credit, there is no limit on the number of years that this credit can be claimed, which is why this credit is particularly attractive to graduate students and those taking classes part-time (and therefore attending college for more than four years).
Tuition and Fees Deduction: Students may look to this tax break to reduce the amount of income subject to tax by up to $4,000. It’s important here to note that fees for student activities, textbooks, supplies, and equipment can be included as a qualified education expense only if the fees were mandatory.
Student Loan Interest Deduction: Taken as an adjustment to income, students who are working to pay off education loans can reduce their amount of taxable income by up to $2,500 with this deduction based on the amount of interest paid on a qualified student loan, covering both required and voluntary interest payments.
Although it would be glorious to benefit from all these at once, a side note to keep in mind is that most students are only eligible for one of the above benefits each year. Visit the Tax Benefits for Education Information Center to find out what credit or deduction would benefit you most!