As a student, you need all the tax breaks you can get. After all, the sky-high prices of textbooks and the expensive tuition fees can really hurt the wallet. Kathy Pickering, the executive director of The Tax Institute at H&R Block who previously shared tax tips for the unemployed, explains which tax benefits higher-education students qualify for.
- American Opportunity Credit: Allows eligible taxpayers to claim up to $2,500 for each of the first four years of college for each students. This credit is 40 percent refundable and up to $1,000 may be refunded to the taxpayer even if there is no tax liability.
- Lifetime Learning Credit: You can receive up to $2,000 for qualified education expenses. You can claim this credit only once per return, but there is no limit on the number of years you can claim the credit. You're eligible for this if you're a student who takes one or more courses. Qualified expenses for the Lifetime Learning Credit include the cost of courses that aren't part of a degree or certificate program. So if you work and take occasional courses to strengthen your job skills, you are eligible for this credit.
For more tax benefits for students, read on.
- Tuition and Fees Deduction: You may be eligible for up to 100 percent of qualified higher education expenses with a maximum of $4,000 or $2,000, depending on the taxpayer's filing status and income level. Like the Lifetime Learning Credit, there is no course load requirement or limit on the number of years the deduction can be taken.
- Student Loan Interest Deduction: If you are paying back student loans used to pay for higher education, you may be eligible to deduct up to $2,500 per return for every year.
- Employer-provided Educational Assistance: If you received educational assistance benefits from your employer, you can exclude up to $5,250 of those benefits each year.
The lifetime learning credit, tuition and fees deduction, and American opportunity credit cannot be combined for the same student, so taxpayers should choose the one that is most beneficial.