For many people, tax season is a stressful time of year. Fortunately, there are ways to come out a winner, especially if you know how to navigate through all of the available tax credits and claim all that’s yours. If you’re a student, then you should be pleased to know that Uncle Sam offers you some extra incentives that you should be taking advantage of. Are you claiming the education tax credits you deserve? Here are some things you should know:
Do you have to be a Student?
When it comes to filing taxes, there are several opportunities for you to benefit from a college education, and you don’t even have to be a current student. The IRS offers credits to those people (or families) who are currently enrolled in college, saving for future college expenses (through a college savings plans like a 529), or even paying on student loans that funded college in the past. Keep in mind, though, that being issued a 1098-T does not automatically qualify you for education tax credits. You will need to speak with a professional to find out for sure.
There are two specific tax credit programs that you may qualify for. They are the Hope Scholarship credit and the Lifetime Learning credit. These credits may apply to either you or a family member that you claim on your tax forms. You will need to examine the qualifications for each credit to determine which applies to you, and it may even be possible that you and a family member qualify for two different credits. Keep in mind, however, that one person cannot qualify for both credits at the same time.
You may be able to deduct up to $4000 of your college bill on your tax returns. Check with a qualified tax preparer for specific expenses that fall under this category. If you file as “married filing separately,” or if you can be claimed on someone else’s tax returns, you won’t be able to qualify for this deduction category. Talk to the administrators at places like www.varsitytutors.com if you are using a tutor, too. You might find part of your extra expense is deductible, too.
If you are currently paying on student loans (or if you paid on student loans throughout the year), then you may be able to deduct the interest paid on those loans. This deduction would come straight out of your income, so it would not have to be itemized on the Form 1040 Schedule A. Additionally, cancelled student loans do not have to be reported as income.
College is expensive, and tax season is anxiety-inducing. Fortunately, you can give yourself a big break in both of these areas by taking full advantage of the education tax credits available to you. It goes without saying that the world of income tax filing is complex and difficult to navigate though. When in doubt, consult with a professional to make sure you’re getting your full due.