Hearing that you must file taxes will likely lead to inward groaning – and maybe even some that is external. However, for students and their families, there are benefits to filing taxes. Though you dread it, you may be eligible for deductions and tax credits just for being enrolled in college.
Whether you’re filing taxes as a student for the first time, or it has been a while since you’ve had a student in college, there are some updates to tax deductible education expenses that you should know about.
• Amount paid in tuition and fees for the prior year
• Scholarships and grant aid
• Reimbursements and refunds
• Student status (i.e. full-time, part-time, or graduate/professional student)
The amount on this form can sometimes be different from what you paid. If there is a discrepancy, report only what you actually paid, and make sure you have the documentation to prove it.
The Lifetime Learning Tax Credit is available to students who are pursuing higher education of any kind. For instance, you do not need to be attending college for a Bachelor’s degree. Rather, you can be taking career development courses to qualify. Students can claim up to $2,000 in credit for qualified education expenses.
The American Opportunity Tax Credit, formerly known as the Hope Scholarship Credit, is available to students seeking a degree, certification, or other recognized credential. It can be claimed for up to four years. Students will receive up to $2,500 in credit on qualified education expenses.
A family cannot claim both education tax credits for one student each year. However, the credits can be stacked for multiple students in a household in college at the same time.
A taxpayer whose modified adjusted gross income is $80,000 or less ($160,000 or less for joint filers) can claim the credits for the qualified expenses of an eligible student. The credit is reduced if a taxpayer’s modified adjusted gross income exceeds those amounts. A taxpayer whose modified adjusted gross income is greater than $90,000 ($180,000 for joint filers) cannot claim any of the credit.
A note about deductible education expenses: these are defined as tuition, fees, and required course materials. Room and board, travel, research, clerical help, or equipment and other expenses that are not required for enrollment do not count as qualified education expenses.
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