Are you looking for a way to get a little more money back in your tax return? Well, good news. If you paid for any education expenses last year, like tuition or even student loan repayments, you may be eligible for a tax benefit.
So, what are tax benefits?
Tax benefits include tax deductions and tax credits. A tax deduction reduces the amount of income that you’re taxed on, while a tax credit reduces the amount of taxes that you owe. Both can translate to a little extra $$$ back in your tax return. (Cha-ching!) The key is to understand what’s available, determine your eligibility, and take action to ensure no money is left on the table.
Tax benefits are available for many common education expenses. Think everything from your college’s tuition and fees, to the interest on your private student loans and federal student loans. College and grad students aren’t the only ones who can take advantage of these tax benefits. Parents, college graduates, and even professionals taking continuing education courses may also be eligible for education-related tax benefits.
What are some of the tax benefits available this year?
This handy graphic highlights the five most common higher education tax deductions and credits:
- The American Opportunity Credit: Eligible students in their first four years of higher education may qualify for an annual credit of $2,500 for education expenses like tuition and books.
- The Lifetime Learning Credit: Undergraduates, graduate students, and students taking professional degree courses may qualify for a credit of up to $2,000.
- Student loan interest deduction: Student loan borrowers may be eligible to deduct up to $2,500 in interest paid on student loans.
- Graduate student tuition waivers: Graduate students with qualified tuition reductions do not have to include the value of the reduction in the income they report.
- 529 plan tax benefits: Depending on your state, savings in 529 plans that are used for qualified education expenses of up to $10,000 may qualify for a tax credit or deduction.
Use it to help you figure out which tax credits and deductions you may be eligible for. Just be sure to check with your financial advisor or accountant to ensure you’re taking advantage of the right benefits.