The Federal Government provides a number of tax incentives that can help defray the cost of higher education. These incentives come in a couple of forms:
- Tax Credits, which directly reduce the amount of tax you owe. Click here for The American Opportunity and Lifetime Learning Tax Credits
- Tax Deductions, which reduce the amount of income that you pay taxes on.
- Tuition and Fees Tax Deduction
The Tuition and Fees Tax Deduction can reduce your taxable income by as much as $4,000. This deduction may be helpful to you if you are not eligible to take one of the tax credits. It is taken as an adjustment to income, which means you can claim this deduction even if you do not itemize deductions on Schedule A of Form 1040.
- Student Loan Interest Deduction. The Student Loan Interest Deduction can reduce your taxable income by as much as $2,500. It is taken as an adjustment to income, which means you can claim this deduction even if you do not itemize deductions on Schedule A of Form 1040. You can deduct interest paid on a student loan for yourself, your spouse, or your dependents.
You will receive information about your educational expenses in a 1098-T statement. Schools are required to send this information to eligible students by January 31 of each year. Be sure to save this information or give it to the person who claims you on their tax return if you don’t claim yourself.
Great Oaks has provided this basic information to students solely for informational purposes and it is not intended to be tax or legal advice. For more information, see IRS Publication 970 - Tax Benefits for Education or consult a qualified tax advisor.