This is the second part of our multi-part blog on tax benefits for education. Any present or former (or future) student should utilize the knowledge, experience and expertise of the tax professionals at the Thorgood Law Firm to ensure that they take advantage all the credits and deductions that the law allows for students of higher education.
Tax credits, deductions and savings plans offer taxpayers ways to reduce their expenses for higher education.
- A tax credit may reduce the amount of potential income tax.
- A deduction reduces the amount of income that is subject to tax, thus reducing the amount of tax paid.
- Certain qualifying savings plans may either allow accumulated earnings to grow tax-free until money is distributed, allow the distribution itself to be tax-free, or both.
- An exclusion from income eliminates income tax on a particular benefit, while eliminating the possibility that such benefit may qualify as a credit or deduction.
Tuition and Fees Deduction
Qualified education expenses such as tuition and other fees paid during the year for a taxpayer, spouse or dependent may be deducted. But this deduction may not be claimed if filing status is married filing separately or if another person may claim an exemption for the taxpayer as a dependent.
The deduction for tuition and fees may reduce the amount of income subject to tax and may be taken as an adjustment to income, even if the taxpayer does not itemize deductions on Schedule A of Form 1040.
Student Loan Interest Deduction
If a taxpayer’s modified adjusted gross income (MAGI) is less than $80,000 ($160,000 if filing a joint return), the IRS allows a special deduction for paying interest on a student loan used for higher education. Student loan interest is interest paid during the year on a qualified student loan and includes both required and voluntary interest payments. The student loan interest deduction may be taken as an adjustment to income, even if the taxpayer does not itemize deductions on Schedule A of Form 1040.
If you are currently enrolled in college, or about to be, and have questions about education credits and deductions, or are repaying a student loan and have questions about interest deductions, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation, call 212-490-0704.
