We are pretty aware of the fact that the tax season is already in full swing and the nation’s planning, saving and paying-for-college company, Sallie Mae now advises students and their families to investigate the often-overlooked tax credits of higher education. There are several educational deductions and tax credits that are available to recuperate the costs of college expenses like fees, tuition costs, and interest which are accrued through student loans. The ultimate goal is to comprehend what is available, what determines eligibility, and to take the right steps to make sure no money is left on the table.
The easy-to-follow flowchart of Sallie Mae can assist students and their families to determine the eligibility criteria for different tax credits and tax deductions. Check out what you may get.
Student loan interest deduction: The students who borrow education loans can be eligible for up to $2,500 in student loan interest deductions to avoid paying tax on their income. This feature is available for both federal and private student loans which are in repayment. Single filers can get a modified adjusted gross income of less than $80,000 and those who have a gross income less than $160,000 can also qualify for a deduction.
The American Opportunity Credit: The eligible taxpayers can qualify for a maximum annual credit of $2500 for every student for the initial 4 years of high education. However, for you to be eligible, you have to be enrolled for around half the time in any degree course or other educational course. You can apply for the credit to course-related books and other supplies besides fees and tuition costs. The married filers with an adjusted gross income of $160,000 will be eligible for full credit.
Fees and tuition deduction: Families and students can claim up to $4,000 in costs for higher education to avoid income subject to tax. This is a deduction that has been taken as an adjustment to income and after this, the person doesn’t need to itemize other deductions. Families can claim a single credit for the same student in a single year and they can’t take both deduction and credit in a similar year.
Lifetime learning credit: The eligible taxpayers can qualify till $2,000 per tax return to be able to pay for graduate, undergraduate and professional degree courses including those that have been designed to boost job-seeking skills. There isn’t any limit on the total number of years a person can claim this credit. It is available to taxpayers with a modified adjusted gross of less than $65,000 or jointly $1,31,000. The amount of credit is reduced for single filers.
There is more information available on education tax credits and that is available through Internal Revenue Service Publication 970, tax benefits for education, or through personal tax advisor. As long as paying for college is concerned, Sallie Mae advises families to first maximize the money that doesn’t need to be repaid like grants and scholarships, then explore federal loans, and then consider a private educational loan.