It’s that time of the year again. You've probably worked on your taxes already, or have plans to do so soon. But did you know that there are certain tax breaks and advantages available to students like you?
Here are three tax breaks that you may be able to use when you file this year.
American Opportunity Tax Credit
This credit is a great tool for qualifying students. It matches dollar-for-dollar up to $2,500 against your tuition or other eligible school expenses. The credit is also refundable, so if it amounts to more than you owe in taxes, you can receive up to $1,000 in your refund.
To qualify, students must be enrolled at least half-time in school and have a modified adjusted gross income of $80,000 or less for a single income, or $160,000 for a married couple. The credit lasts for the first four years of post-secondary education.
Be careful to keep records of any of your claimed non-tuition expenses. The IRS weighs students’ 1098-T information against their American Opportunity Tax Credit claims, and they will ask for documentation if the expenses don’t match up.
Lifetime Learning Credit
If you’re out of school but taking continuing education or career classes, you can still receive a tax benefit if you qualify. The Lifetime Learning Credit offers a credit that equals 20 percent of the cost of qualified higher education expenses. The cutoff is $2,000, and the credit is nonrefundable—meaning you can’t use it to build a bigger tax refund.
You also can’t use the Lifetime Learning Credit and the American Opportunity Tax Credit at the same time. Still, this is useful if you’re taking continuing education classes but not currently in school half- or full-time.
Just be sure to keep detailed records of your education costs. This credit is also dependent on your modified adjusted gross income and begins reducing at $56,000.
Student loan interest deduction
You can deduct up to $2,500 in qualified student loan interest from your taxes, which can help a lot. To be able to make this deduction, the loan must have been put toward a qualifying education expense and come from an appropriate lender (unfortunately parents or family friends don’t count).
Again students must make less than $80,000 for a single income, or $165,000 for a married couple. This deduction can continue long after you leave college (although you should still try to pay off student loans as quickly as possible).
Hopefully these tips help! Remember to talk with a tax professional if you want to take advantage of any of these tax breaks. And don’t forget—now that you have you tax information, you can start working on your FAFSA applications.