Tax Savings on Your Education
Mar 10, 2015
If you’re helping to pay for your child’s college education, you need a break. See if you can take advantage of any of the tax breaks that follow.
Take Credit There are two federal tax credits for the payment of qualified tuition and related expenses (not room and board). A tax credit is a big break because it reduces your income tax dollar-for-dollar. You can’t use both credits in the same year for the same student.
American Opportunity Tax Credit is available for the first four years of post-secondary education. The credit for 2015 is 100% of the first $2,000 of qualified expenses and 25% of the next $2,000. So, the maximum credit for each eligible student in your family is $2,500.
Lifetime Learning Credit is available for both undergraduate and graduate education. The credit is 20% of up to $10,000 of qualified expenses per taxpayer return. So, the maximum credit you can claim in one year for all students in your family is $2,000. Both credits are subject to income restrictions.
Deduct Your Expenses A tax deduction reduces the income on which you’ll be taxed. If you’re eligible, you can claim a deduction for student loan interest even if you don’t itemize your deductions. Interest of up to $2,500 is deductible in 2015 if your income doesn’t exceed tax law limits. If you’ve taken a loan to pay for your child’s education, check into the requirements for the deduction — it’s a break you won’t want to miss.