Getting a college education is very expensive, and is getting more expensive each year. A recent report done by the New York Federal Reserve Bank found that the American debt situation is not getting any better. In fact, American students have taken over $42 billion in student loans last year. Despite this, U.S. citizens have left behind almost $800 million worth of tax benefits. That’s an average of $460 per person. There are some tax advantages for students that could help them pay their bills and remain in college. Due to the fact that the national student debt has already risen past $1 trillion, it is likely a good time to review some of these lucrative tax breaks for students. Here are some tax benefits to be aware of as a college student.
Fees and Tuition Deduction
This type of tax deduction can lower the amount of your income that is subject to taxes by $4,000 or less. You can deduct qualified expenses for education for yourself, a dependent or a spouse. It is required that the education expenses is for a higher education, meaning any education you receive after high school. This includes tuition and other expenses and fees that are required such as books, supplies and activity fees. You may not include any personal expenses, such as for room and board. You don’t need to file for an itemized tax return in order to claim these deductions unless you’re claiming it as a business expense. You may not claim this deduction if you’re also planning on claiming an education tax credit, you paid for the expenses using a grant, scholarship, employer education assistance, education savings account or veteran assistance. You may also not file for this deduction if you or your spouse were a non-resident for a portion of 2014. You can claim this deduction if you are making less than $80,000 if you’re single, and $160,000 if you’re filing jointly. In order to claim your deduction for fees and tuition make sure to complete the 8917 Form along with your tax return.
Student Loan Interest Deduction
If you paid any amount of interest on your student loan and the type of income you receive qualifies, you may be able to lower the amount of your income that is subject to taxes by up to $2,500. You may be able to take this interest deduction if you, a person who is dependent or your spouse is a student who is at least enrolled half time in an education program. The student loan must have been used for necessary and qualifying expenses. These include fees and tuition, as well as books, supplies, transportation and equipment. You must be making less than $65,000 or $130,000 if you are filing jointly. In order to claim the tax deduction, you simply must enter in the allowable amount in your tax return in order to make the adjustment on your taxable income.
Education Tax Credits
You may only claim one tax credit in a tax year for every person in your family. For instance, you may claim one tax credit for yourself and the other for your daughter. You are not able to claim fees and tuition tax deduction during the same year that you claim an education tax credit. It is important that you find the option that benefits you and your family the most.
American Opportunity Credit
You may receive a tax credit for up to $2,500 for each student in your family. It may only be used for four years of a post-secondary education after completing high school for any undergraduate degree, or another recognized education credential. As much as $1,000 of this tax credit is refundable, and so you’ll be able to receive it even if you won’t owe taxes this year. It is required that the student is enrolled in an education institution at least part-time. The credit may be used for fees and tuition, as well as course-related books, equipment and supplies. You are able to claim this credit if you’re making less than $90,000 and are single or $180,000 if you’re filing jointly.
Lifetime Learning Credit
You can receive this type of tax credit for as high as $2,000 for each student in your family. This credit can be used for all the years that you are attending a post-secondary education once you’ve completed high school and any single classes that you attend to improve a job skill, such as a non-degree program. The maximum credit is limited to the amount of taxes that you owe on your tax return. It can be used for fees and tuition, as well as supplies, equipment and course-related books. You may claim this credit if you make less than $60,000 per year if you’re single, and $120,000 if jointly filing.