Back to School Tax Tips

Back-to-School Tax Tips 

If you are going to college payment deadlines for tuition and other fees are coming up fast. If you want to deduct the expenses or apply for credits keep your receipts.  The following four items may benefit you at tax time.

1. American Opportunity Credit       The credit can be up to $2,500 per eligible student and is available for the first four years of post secondary education. Forty percent of this credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment.  Can include graduate school as well.
2. Lifetime Learning Credit       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.
3. Tuition and Fees Deduction  This deduction can reduce the amount of your income subject to tax by up to $4,000 even if you do not itemize your deductions.
4. Student loan interest deduction       You may be able to deduct interest paid on a student loan used for higher education 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.

For each student, you can choose to claim only one of the credits in a single tax year. However, if you pay college expenses for two or more students in the same year, you can choose to take credits on a per-student, per-year basis. You can claim the American Opportunity Credit for your daughter and the Lifetime Learning Credit for your son.

You cannot claim the tuition and fees deduction for the same student in the same year that you claim the American Opportunity Credit or the Lifetime Learning Credit. You must choose to either take the credit or the deduction and should consider which is more beneficial for you.

Income limits also apply to these credits so please check with KatTax at 702-796-1040 to determine your eligibility.