Education Tax Breaks

If you are planning on going back to school or if you have a child who is about to enter school for the first time, then you have probably heard that there are some “education tax breaks” out there that can help you out financially.  

The good news is that this is entirely true! What you should be aware of, however, is the fact that there have been some changes to these tax breaks in recent years and, thus, it is important for you to be aware of the changes, as well as the general truths surrounding these breaks.

The American Opportunity Tax Credit

To begin with, one credit that you will definitely want to be aware of is the American Opportunity Credit. This credit was once called the “Hope Credit.”

In the new tax year, a deduction of $2,500 can be applied per student. The relevant funds can be used for any required course materials and any tuition an/or fees associated with obtaining a four-year degree.

However, be aware that there are adjusted gross income limitations associated with achieving the credit, so you’ll want to speak with an accountant or other tax professional to determine if you qualify.

Deductions on Student Loan Interest

Whether you choose to itemize your deductions or not, you can easily save money by deducting up to $2,500 worth of interest on student loans.

 This tax break applies whether you’re a student or a parent as long as you have an adjusted gross income of under $80,000 if you’re single and under $160,000 if you’re married.

Non-Taxable Income

If you’re using certain plans to save for college, such as the Coverdell Savings Account and the 529 Education Savings Plan,, you’ll be glad to know that, as long as you use the money to pay for education-related costs, the money is non-taxable.

You can even claim a credit if you pay more than you receive from your Coverdell or 529 Education Savings Plan fund.

As you can see, there are a lot of great and perfectly legitimate ways to “catch a break” when paying for education.

In fact, the options provided here are just a few of many. To learn about more and to take full advantage of everything that you qualify for, get in touch with financial professionals for even more great help and advice.