4 College Tax Breaks to Remember
NEW YORK (TheStreet) -- Parents of college students or those working on their own degree should know of the many tax breaks linked to college spending that can make a big difference when you ship your taxes off to the IRS.
Yet a recent study from Sallie Mae says only 41% of parents with kids in college take advantage of education tax credits or student loan interest deductions.
"It is worth it to learn what tax breaks for education expenses are available and how you can qualify," said Nikki Lavoie, a Sallie Mae spokeswoman. "Filing for education tax credits and student interest tax deductions is one way to make college more affordable."
Fortunately, it's not too late to grab these tax breaks, with more than a month to go until tax deadline day, April 15.
To get going, Sallie Mae points the way to these college-based tax breaks. See if you qualify:
American Opportunity Tax Credit: The AOTC was recently extended through the 2017 tax year, and for the 2013 tax year it allows college students and parents who pay for college to claim a tax credit of up to $2,500 for costs related to tuition, fees and textbooks, but only for the first four years of college. To get the maximum credit amount, a taxpayer must have modified adjusted gross income of less than $80,000, or $160,000 for joint filers. Low-income families who owe no tax may be eligible for a credit refund of up to $1,000 for each qualifying student.
Lifetime Learning Credit: The LLC is another tax credit designed to cut the costs of tuition, fees and college expenses. The credit can rise to as much as $2,000; a taxpayer must have modified adjusted gross income in 2013 of less than $53,000 (or $107,000 for joint filers) to qualify. Students in undergraduate and graduate schools are eligible.
Student Loan Interest Deduction: Sallie Mae calls the SLID an "above-the-line" deduction of up to $2,500 for interest paid on qualified federal or private higher education loans. To qualify, joint filers must have modified adjusted gross income of less than $125,000, or $60,000 for single taxpayers. Use IRS Form 1098-E to determine the amount of any potential deduction.
Tuition and Fees Deduction: This deduction can go up to $4,000 and is available to taxpayers with modified adjusted gross income of less than $65,000, or $130,000 for joint filers. Use IRS Form 1098-T to help calculate the deduction.
For more tax break information, check out IRS Publication 970, Tax Benefits for Education, or consult a professional tax preparer.