College costs are getting higher while financial aid is dwindling, so now is the time to check into tax breaks for college students. There are several different ways you can lower your college costs by taking advantage of every break the IRS has to offer.
The IRS offers several deductions and credits for college students that you can use to help pay for your education. Below is a list of some of the tax breaks you should look into to offset the costs of higher education.
1. American Opportunity Tax Credit: You can save up to $2,500 with credits from the American Opportunity Tax Credit and could even be eligible for a $1,000 tax refund, even if you don’t owe any taxes.
2. Lifetime Learning Credit: With this credit, you can get even more tax credits for a longer amount of time, but you can only use one credit per year of college.
3. Tuition and Fees Tax Deduction: This is a deduction on your income for tuition and fees, not a credit. You can save on the amount that is equal to your deduction. You can save about $280 in taxes with this deduction. If you don’t qualify for credits because of your income, you can use this deduction instead.
4. Student Loan Interest Deduction: The average student loan amount is about $24,000 and interest on those loans can get expensive. But the IRS has offered a way for college students to take a deduction on their interest without itemizing. It is closely related to tuition and fee deductions as it lowers your taxable income.
5. Work Related Education Expense Deduction: If you don’t qualify for any other credits or deductions, you can take this deduction, but you have to meet some IRS guidelines. You can take this deduction if you are in college to enhance your skills in your current job field, and you would record it on Schedule A. This deduction is subject to a 2% of Adjusted Gross Income before you will save anything.
It is more important than ever for college students to find a way to save on their education because of the rising expense. Most taxpayers don’t know that these credits and deductions are available to them. To find out if you qualify for any of these savings, you can talk to a tax professional and financial advisor or call the IRS to request information. You can also visit the IRS website at irs.gov to get more information on these credits and deductions.