Returning to school can be a huge decision. It is not only extremely time consuming and stressful, it is also a big financial burden. In order to pay for college tuition, room and board many individual take out hefty student loans from
private loan institutions and the government without any consideration on how these loans will be paid back in the future. One way to either avoid these loans or pay a portion of them back while you are still in school is to take advantage of the tax credits and deductions offered to individuals in pursuit of a higher education.
The first education credit that is offered to students is called the Hope Credit or American Opportunity Credit. The full
credit, generally around $2,000-$2,500, is available to students whose modified adjusted gross income is below $80,000 as a single individual or $160,000 as a joint tax filer. Another stipulation for this tax credit is that you must be enrolled in an accredited undergraduate college or university at least half time in order to take the credit on your yearly taxes.
Another credit that may be beneficial is called the Lifetime Learning Credit, which is worth approximately $2,000 a year. The difference between the Lifetime Learning Credit and the Hope Credit (American Opportunity Credit) is that while the Hope Credit can only be taken for undergraduate studies, the Lifetime Learning Credit can be taken for any
“higher education courses” you take throughout your life. The two credits cannot be taken during the same tax year, however, and it is recommended that you take the credit that offers you the most benefit for that particular year. Additionally, eligibility for the Lifetime Learning Credit is based around your modified adjusted gross income, which must be below $50,000 as a single individual or under $100,000 as a joint filer.
Finally, if you are either finished with school and making student loan payments or are still in school but making payments (either interest only or regular payments), you can deduct the interest you have paid on your student loans on a yearly basis up to $2,500. In order to take the maximum allowable deduction of your student loan interest on your yearly taxes, your modified adjusted gross income must be below $60,000 for a singleindividual and $120,000 for a joint filer.
The IRS, your local financial consultant, or a tax professional can offer you more detailed information about the credits available to you and how they can be claimed on your yearly taxes.
Author’s Bio: Val Anne is an in-house writer from Franklin Debt Relief , a company specializing in programs for people with high credit card debt.