The back to school purchase season has come and gone and now the focus should be on saving those receipts for tax credits. Don’t be the college student or parent of a college student that misplaces a receipt only to find out that you can’t take advantage of the tax credits that are available to you.
Remember the American Opportunity Tax Credit
Up to $2,500 of tuition and related expenses such as course material can be claimed during the first four years of college; it used to be the first two years. Keep in mind that you start to phase out for this tax credit if your adjusted gross income (AGI) exceeds $80,000 for filing single or $160,000 if married.
Don’t Qualify For the American Opp.?
Although the American Opportunity tax credit is generally a better option, many college students don’t qualify for this credit. The alternative is the Lifetime Learning Credit. This credit of up to $2,000 is for all eligible students enrolled in an educational institution for a post-secondary degree or to improve or acquire skills. This credit can be claimed even if you are taking one class which is different from the American Opportunity credit. But, the credit cannot be claimed for books & the total credit amount is below the American Opportunity Credit. Students start to phase out for this credit if your adjusted gross income (AGI) exceeds $60,000 for filing single or $120,000 if married.
Don’t Forget The 529 Savings Plans
For those of you that don’t know, a 529 savings plan is a tax-free college savings account sponsored by a particular state or groups of states that is used strictly for college expenses. You can now use money from your 529 savings plan to purchase computers and other technology related goods for your college education. There’s also usually a nice state tax deduction for contributing to a 529 savings plan. For New York State sponsored plans, if your status is married filing jointly, you could deduct up to $10K of your contribution – married filing separate would be up to $5K for the yr. The highest income tax rate for New York State is 6.85% – so essentially if you were able to deduct the full $10K you’d be saving $685 on your state income tax return. Rules vary by state, so check with your state for more details.
More Student Tax Credit Questions?
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