Are You Paying for College Expenses?
If you, your spouse, or a dependent are going to college this year, then the IRS would like to remind you to keep all receipts for all of the college expenses you pay for. You may qualify for some tax benefits.
The following credits & deductions are available for those who qualify:
1. American Opportunity Credit—this credit has been extended through 2012. The credit can be up to $2,500.00 per eligible student for qualified expenses which include tuition and fees, and required books, supplies, & equipment. The full credit is available to taxpayers whose modified adjusted gross income is below $80,000.00 ($160,000.00 for married filing jointly) & for students who are in their first four years of college.
2. Lifetime Learning Credit—this credit can be up to $2,000.00 per eligible student for qualified education expenses. To claim this credit, your modified adjusted gross income must be below $60,000.00 ($120,000.00 for married filing jointly).
3. Tuition and Fees Deduction—this deduction can be up to $4,000.00 for an eligible student for qualified education expenses. To claim this deduction, your modified adjusted gross income must be below $80,000.00 ($160,000.00 for married filing jointly).
4. Student loan interest deduction—this deduction can be up to $2,500.00 on interest paid for a student loan used to cover college expenses. To claim this deduction, your modified adjusted gross income must be below $75,000.00 ($150,000.00 for married filing jointly). This deduction doesn’t require you to be currently going to college, as long as you are paying interest on your student loans and you meet the income requirement. It also won’t affect your ability to take any of the above 3 credits & deductions.
For each student, you can only claim one of the top 3 credits & deductions. If you have multiple students attending college, each student can claim different credits/deductions depending on their eligibility for each credit/deduction and the tax benefits. When we prepare your tax return, we will choose the credit or deduction that provides the greatest tax benefit for you. Since different credits/deductions allow for different expenses, it is a good idea to keep all of your receipts.
In order to claim any of these credits and/or deductions on your return, the student must be someone you can claim an exemption for on your tax return (you, yourself, or a dependent).
If you have any questions on if you can qualify for any of these credits or deductions, please feel free to give us a call.
IRS Tax Tip 2011-18