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If you're a student or recent graduate, are there any tax credits or deductions you should know about?
Even for the college-educated set, the maze of IRS tax rules, credits, and deductions can seem way too complicated. Nobody should have to figure it out by themselves.
With taxes due in a little over a month for most taxpayers (unless you get an extension), here are two tax credits and one deduction that may pay off for students and/or recent graduates:
The American Opportunity tax credit allows students to claim up to a $2,500 credit for expenses paid for higher education. This credit can be claimed for the first four years of post-secondary education. Eligible expenses include tuition and fees, and expenses paid for course-related books, supplies and equipment.
The credit is calculated as 100 percent of the first $2,000 of expenses, plus 25 percent of the next $2,000.
To be eligible for the credit, you must be a student enrolled at least half-time in a program leading toward a degree or certificate, and have not yet completed four years of post-secondary education. Your modified adjusted gross income (MAGI) must be $80,000 or less to claim a full credit.
If you have already completed four years of higher education, but are still enrolled in a higher education program, you may be eligible for the Lifetime Learning credit.
The Lifetime Learning credit applies to tuition and fees. If eligible, you can claim 20 percent of the first $10,000 of expenses, for a maximum credit of $2,000.
To be eligible for this credit, you need not be pursuing a degree but must be enrolled in at least one post-secondary course. To claim a full credit, your income must be $52,000 or less.
If you are no longer enrolled in school, there may still be an education-related tax deduction for you. While interest payments are usually not deductible, you may be able to deduct student loan interest from your income.
This deduction allows you to deduct up to $2,500 of interest payments. You are eligible for this deduction if you paid interest on a qualified student loan last year, and your modified adjusted gross income was less than $80,000.
A qualified student loan is one used solely to pay for education expenses, including tuition and fees, room and board, and supplies.
While these are only three of the many tax credits and deductions allowed by the IRS, an experienced tax attorney may be able to help you determine what other credits and deductions you may qualify for.
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