With taxes due in a couple of weeks, I’m a little late in covering this topic, but it should still come in useful for people, like me, that tend to put some things off until the last minute. Regardless of when you file your taxes, I think everyone can agree that we’re all interested in one thing — saving money on taxes.
Fortunately, there are a few tax breaks specifically for college students and recent grads, which could save you thousands of dollars over the years. Here’s a brief overview of the tax breaks available for college students and recent grads:
Lifetime Learning Tax Credit
This tax credit is available to students who take at least one class from an accredited school. This includes both undergraduate and graduate institutions. Students who qualify can get credit for 20% of the first $10,000 they spend on educational expenses, resulting in a maximum credit of $2,000. To qualify for this tax credit, single filers must have an adjusted gross income of less than $57,000, and joint filers must make less than $114,000.
Hope Scholarship Tax Credit
This tax credit is available to students who are enrolled in college at least half-time and are in their first two years of undergraduate study (freshmen and sophomores). The income cap requirements are the same as the Lifetime Learning Tax Credit. Students who qualify are eligible to receive 100% of their first $1,000 and 50% of their next $1,100, resulting in a maximum credit of $1,650. To be eligible for this credit, the student must be free of any felony convictions involving the possession or distribution of controlled substances before the end of 2007.
Tuition and Fees Deduction
Single filers with adjusted gross incomes between $65,000 and $80,000 or families who make between $130,000 and $160,000 may be eligible for as much as a $4,000 deduction. This deduction can benefit taxpayers who do not qualify for either the Hope Scholarship or Lifetime Learning Education Tax Credits. Up to $4,000 may be deducted from tuition and fees required for enrollment or attendance at an eligible postsecondary institution. Since the Tuition and Fees Deduction is taken as an adjustment to income, you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). However, the deduction only includes the cost of tuition and fees. Personal living expenses such as room and board, insurance, medical fees, and transportation are not deductible.
Student Loan Interest Deduction
If your adjusted gross income is less than $70,000 (or $140,000 for a joint return) and you’re paying back student loans, then you qualify for the Student Loan Interest Deduction. You can reduce the amount of your income subject to tax by up to $2,500. Similar to the Tuition and Fees Deduction, you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). For more details of what qualifies as student loan interest, read more about the Student Loan Interest Deduction at the IRS site.
That does it for my roundup of tax benefits available for college students and recent grads. Please note that I am by no means a tax expert, so feel free to correct or clarify any information that may not be completely accurate. Also, check out the following resources for more detailed information about the tax breaks I mentioned above:
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You may want to clarify that you can only claim ONE of the first three items. I’ve found that you should either understand how taxes are calculated or play around with your options to discover the best option for your situation.