If you are a parent paying for a student attending college, then there’s good news—in addition to extra space in the house. Besides the two credits—the American Opportunity Credit and the Lifetime Learning Credit—there are two categories of deductions that may apply and CRI has provided the basics below. These school deductions include:
- Tuition and Fees Deduction: This deduction can reduce the amount of your income subject to tax by up to $4,000—even if you do not itemize your deductions. Generally, you can claim the tuition and fees deduction for qualified higher education expenses for an eligible student if your modified adjusted gross income is below $80,000 ($160,000 if married filing jointly). Note: Congress extended this deduction through 2014. Check back here to learn if Congress extends the deduction to 2015.
- Student Loan Interest Deduction: Generally, personal interest you pay, other than certain mortgage interest, is not deductible. However, if your modified adjusted gross income is less than $80,000 ($160,000 if filing a joint return), you may be able to deduct interest paid on a student loan used for higher education during the year. It can reduce the amount of your income subject to tax by up to $2,500, even if you don’t itemize deductions.
Before claiming either of these deductions, consider that individuals claiming the tuition and fees deduction for the same student in the same year that claim the American Opportunity Credit or the Lifetime Learning Credit. So, bottom line, choose either the credit or deduction that provides the most tax savings. Need help making this tax decision? Call CRI’s tax professionals now.