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Being a college student isn’t a cheap business — there’s tuition, housing, books and a host of other costs. Reportedly, a bipartisan bill is in the works in Congress that eventually would help people pay down student loan debt.
But this tax season offers an opportunity to reduce those costs right now. There are a number of great deductions that students and their families can claim on their tax returns, according to just-released guidance from Sallie Mae, the national saving, planning and paying for college company.
Student loan interest deduction
Sallie Mae says student loan borrowers may be eligible for up to $2,500 in student loan interest deductions to offset taxable income. This deduction is available for both federal and eligible private student loans in repayment. To qualify, you must be a single filer with a modified adjusted gross income of less than $80,000, or filing jointly with a modified adjusted gross income of less than $160,000.
Tuition and fees deduction
Students or their families can claim up to $4,000 in expenses for higher education to offset taxable income. This deduction is taken as an adjustment to income, so you don’t need to itemize other deductions. Sallie Mae says that individuals with a modified adjusted gross income of up to $80,000 and those filing jointly with a modified adjusted gross income of up to $160,000 qualify for this deduction. Families can claim only one credit for the same student in any one year. Also, they cannot take both this deduction and a credit in the same year.
American Opportunity Credit
You may qualify for a maximum annual credit of $2,500 per student for the first four years of higher education. To qualify, students must be enrolled at least half-time in a degree or other recognized educational credential. In addition to tuition and fees, the credit can be applied to course-related books and supplies.
Single taxpayers with incomes of up to $80,000 can receive the full credit. Partial credit is available for single taxpayers with incomes amounting to $90,000. Married filers with an adjusted gross income up to $160,000 are eligible for the full credit, and a partial credit is available for those with incomes of up to $180,000.
Lifetime Learning Credit
Eligible taxpayers may qualify for up to $2,000 per tax return to help pay for undergraduate, graduate and professional degree courses. This includes courses designed to improve job skills. There is no limit on the number of years someone can claim the Lifetime Learning Credit.
The Lifetime Learning Credit is available to taxpayers with modified adjusted gross income of less than $65,000, or less than $131,000 to qualify if you are filing jointly. The credit is reduced gradually for single filers making more than $55,000, and for joint filers making more than $111,000.
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