You can get tax relief on the money you spend on education expenses. These benefits are for part-time and full-time students, married students, and parents of dependent students. Check with your tax professional, but there are a few credit options to choose from for educational expenses.
There are a few to choose from.
Hope Tax Credit
You can reduce your federal tax by as much as $1,800 for each student on tuition and fees that are not paid by student loans. You may take this claim for two years, if you:
- Have not yet completed the first two years of your education,
- Are enrolled in a program that leads to a degree, certificate, or other diploma,
- Are enrolled as at least a half-time student in your major for one semester during the year,
- Don’t have any felony convictions that are drug related.
School tuition and fees, minus any grants or scholarships, qualify for the Hope Credit. Check with your school’s financial aid office to find out if books and supplies are covered because they generally aren’t. This tax credit does not cover room and board, insurance, transportation, or medical fees.
To claim a Hope Tax Credit, you must file using the 1040 or 1040A and attach the 8863 (Education Credits). Itemizing your deductions is not required.
Lifetime Learning Tax Credit
You might be able to claim a Lifetime Learning Credit of up to $2,000 for education expenses paid for students enrolled in eligible higher education. There is no limit on the number of years the lifetime learning credit can be claimed for each student.
You can claim this credit if your family has children enrolled at an eligible college or university. The Lifetime Learning Tax Credit:
- Isn’t based on the student’s course load and it is allowed for more than one course,
- It isn’t limited to students in their first two years of college,
- Can be claimed for expenses for graduate-level courses,
- Has no limit on the number of years the credit can be claimed for each student,
- Doesn’t increase based on the number of students receiving qualified expenses.
To claim a Lifetime Learning credit, you need to file using the 1040 or 1040A and attach the 8863 (Education Credits). Again, you don’t have to itemize your deductions.
Tuition and Fees Deduction
You can reduce income that is taxed by up to $4,000 for tuition and related expenses. Tuition and fees required for enrollment at an eligible college, university, or vocational school are qualifying expenses. These expenses must have been made by the taxpayer, the taxpayer’s spouse, or the taxpayer’s dependent.
To claim this deduction, you must file the 1040 and, once again, you do not have to itemize your deductions.
Student Loan Interest Deduction
If you have student loans, you might be able to deduct up to $2,500 in yearly interest. In order to qualify, you should have used the loan for higher education expenses, including tuition, fees, room, board, supplies, and other related expenses.
If you have already paid at least $600 in interest on your student loans during the year, you will receive a 1098-E (Student Loan Interest Statement) from the bank, a government agency involved in student loans, or from your school’s financial aid office.
To claim this deduction, you must file the 1040 or 1040A. Itemizing deductions is not required here, either.
Before you decided on which credit or deduction works best for you, seeking the advice of a tax professional or your school’s financial aid counselor would help you find out which one will benefit you most.
Daniel Stoica Accounting Professional