Tax Breaks for the Students in Your Family
 | (NewsUSA) - College costs may have entered nosebleed territory, but at least Uncle Sam is there waving a hanky in the form of juicy tax credits and deductions for those smart enough to claim them.
If you've been footing those education bills, either for yourself or your child, the latest College Board statistics shouldn't be a shocker: In-state tuition and fees at four-year public colleges rose an average of 8.3 percent last year -- to $8,244 -- even as the economy sputtered. "That's a terrible upfront burden for many families," says Elaine Smith, master tax advisor at H&R Block (www.hrblock.com), the giant tax preparation firm. "But at least there are several breaks built into the tax code that could even mean the difference between whether you owe taxes or are due a refund." What breaks? Read on: * American Opportunity Tax Credit. This is the Gold Standard for those who qualify. Meaning, it's a dollar-for-dollar tax offset of up to $2,500, per student year, for up to four years of undergraduate education. "One of the best things about it is that up to $1,000 of the credit is 'refundable,'" notes Smith. "So you could wind up getting a refund for that amount if no taxes are otherwise due." Biggest cautions: You must be enrolled at least half-time in a degree program to claim it, and -- like all these breaks -- the benefit starts to phase out once you reach a certain adjusted gross income (AGI). * Lifetime Learning Credit. Eligibility standards for this one are broader, even if it's less generous than the AOTC. Pursuers of both college and graduate degrees -- as well as those taking classes to improve job skills -- potentially stand to benefit from a tax credit up to $2,000. Biggest caution: The credit can only be claimed once per tax return, regardless of the number of students taking courses. * Student-Loan Interest Deduction. If you're self-financing, congrats -- and skip this one. If not, we're talking up to $2,500 per year. Biggest caution: Only debt from graduate and undergraduate programs qualifies. * Tuition and Fees Deduction. There's a built-in caution to this $4,000 deduction: You can't claim it and the Lifetime Learning Credit for the same student, so do the math to see which works best. Of course, if the "M" word -- math -- scares you as much as the looming April 17 filing deadline, consult a professional like those at H&R Block, which offers in-person services at its retail offices nationwide as well as the only face-to-face online preparation through Block LiveSM. One last tip: For those wondering whether scholarship income awarded for room and board is tax-exempt, the answer, alas, is no. |
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