The IRS just released a nice summary of education credits and
deductions. If you have any questions let us know.
Back-to-School Tips for Students and Parents Paying College Expenses
Whether you’re a
recent high school graduate going to college for the first time or a returning
student, it will soon be time to head to campus, and payment deadlines for
tuition and other fees are not far behind.
The IRS offers
some tips about education tax benefits that can help offset some college costs
for students and parents. Typically, these benefits apply to you, your spouse
or a dependent for whom you claim an exemption on your tax return.
·
American Opportunity
Credit. This credit, originally created under the American
Recovery and Reinvestment Act, is still available for 2012. The credit can be
up to $2,500 per eligible student and is available for the first four years of
post secondary education at an eligible institution. Forty percent of this
credit is refundable, which means that you may be able to receive up to $1,000,
even if you don't owe any taxes. Qualified expenses include tuition and fees,
course related books, supplies and equipment.
·
Lifetime Learning
Credit. In 2012, you may be able to claim a Lifetime Learning
Credit of up to $2,000 for qualified education expenses paid for a student
enrolled in eligible educational institutions. There is no limit on the number
of years you can claim the Lifetime Learning Credit for an eligible student.
You can claim
only one type of education credit per student in the same tax year. However, if
you pay college expenses for more than one student in the same year, you can
choose to take credits on a per-student, per-year basis. For example, you can
claim the American Opportunity Credit for one student and the Lifetime Learning
Credit for the other student.
·
Student loan interest
deduction. Generally, personal interest you pay, other than certain
mortgage interest, is not deductible. However, you may be able to deduct
interest paid on a qualified student loan during the year. It can reduce the
amount of your income subject to tax by up to $2,500, even if you don’t itemize
deductions.
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 or check out Publication 970, Tax
Benefits for Education, which can be downloaded at IRS.gov or ordered by
calling 800-TAX-FORM (800-829-3676).
Links:
· Tax Benefits for Education: Information Center
· Publication 970, Tax Benefits for Education
· The American Recovery and Reinvestment Act of 2009: Information Center
· Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits)
