I can’t believe how quickly summer has gone. School is starting up in our area and I just saw on the news that it’s moving day for many university students.
For many parents, this time of year can be stressful and not just because of the physical and emotional transition involved.
With college costing more every year, families are looking for ways to manage their finances. While I covered some great tax credits and deductions for parents, I want to focus on school related tax breaks.
Federal education tax deductions and credits focus on post secondary education, but check with your state to see if there are any benefits for paying your child’s education from kindergarten to high school.
Higher Education Credits and Deductions
If you have a child attending college this year or if you are a college student and you are not claimed as a dependent, keep good records because you can get some wonderful tax credits and deductions for college expenses.
American Opportunity Credit
Depending on your household income, you can receive a tax credit up to $2,500 for each qualifying student. Qualifying students have to be enrolled at least half time and be pursuing a degree or some academic credential if you want to claim this credit.
You can claim the tax credit for the first four years of college enrollment for your child, provided your child and the school they attend meet the requirements.
Students can also claim this credit on their taxes as long as they are not claimed as a dependent.
Qualifying expenses include tuition, books, and related materials such as mandatory school activity fees and certain course related equipment. Please be aware that room and board does not count as qualifying expense. You should receive a Form 1098-T from the educational institution you paid by January 31 so that you can include the expenses on your taxes.
Lifetime Learning Credit
Unlike the American Opportunity Tax Credit, you can claim the Lifetime Learning Credit for as many years as you pay qualifying expenses for your higher education.
Another difference you may want to know – Lifetime Learning Credit can be used even if you not pursuing a degree.
You can claim up to $2,000 credit per tax return. Please note, you cannot claim both credits in the same year, but TurboTax will give you the tax credit you qualify for.
Student Loan Interest Deduction
This can be a boost for both you and your child if either one of you took out student loans. You may be able to deduct the interest you paid on the loans up to $2,500 (if your modified adjusted gross income is less than $75,000 for single filers and $155,000 for joint).
This deduction can be a big help as it is used to calculate your taxable income. You should receive a 1098-E by January 31 that will give you information on qualifying interest paid that you can deduct on your tax return.
Thoughts on Back to School Tips
I hope this information helps you when it comes time to file your taxes. TurboTax will figure out the education tax credit or deduction you are eligible for based on your entries.
Until then, please enjoy this new stage in your lives and I wish your family plenty of success this school year and beyond!
How many of you are parents? For those with children in college or if you’re a student, have you been able to take advantage of these education tax credits or deductions?