A primer of education tax
breaks
Are your children in college?
You may be able to offset some of the costs of their education with tax breaks.
Here's a "tax primer."
Education tax credits include the American Opportunity Tax Credit
and the Lifetime Learning Credit. The American Opportunity Tax Credit can
reduce your tax bill by up to $2,500 per student. Currently, the credit can be
claimed for all four years of study, and up to 40% of the credit can be
refundable. The maximum Lifetime Learning Credit is $2,000 regardless of the
number of college students in your family. Both credits are subject to limits,
depending on your income.
The student loan interest deduction is an above-the-line deduction
of up to $2,500 a year for interest paid on student loans. The deduction will
phase out depending on your income.
Education savings accounts let you set aside up to $2,000 per year
per child in a tax-deferred account for elementary, secondary, or higher
education expenses at either private or public schools. Phase-outs apply.
Section 529 plans include tax-favored college savings plans and
prepaid tuition accounts. Tax-free withdrawals can be used to pay for tuition,
fees, supplies, equipment, and certain room and board expenses.
Be sure to keep records of your
tuition, fees, and other expenses so you can take advantage of all education
tax breaks to which you're entitled. For details and assistance, contact our
office.
