A college education can be expensive. That being said, there are various incentives proposed by the National Association of Student Financial Aid Administrators each year seeking to ease the burden of finance for both students and the parents who support them. In this post, we’ll take a look at the various plans available to you as well as the eligibility criteria you need to meet to be considered.
The American Opportunity Tax Credit
This is an incentive which takes into account the amount you spend on your first 4 years of college. It also provides you with the opportunity to get a partial refund in the form of a check from the IRS of up to 40 percent of your total expenditure during these 4 years.
In order to be considered, you must:
- Have a modified adjusted gross income of $90,000 as an individual or $180,000 for a joint couple.
- As a student, you must have been enrolled at the very least half the time for one term during that academic year in the quest to get a degree, certificate or related credential.
- You must be in an eligible school such as a public, accredited, proprietary, nonprofit or postsecondary institution
- The incentive is only available during the first four years of undergraduate postsecondary education
- File an income tax return
- Not have been convicted of a felony for distribution or possession of a controlled substance.
The Lifetime Learning Tax Credit
This is available to all students, regardless of their postsecondary education. This credit is best suited to graduate students. The Lifetime Learning Tax Credit provides up to $2,000 per submitted tax return. Please note that you cannot get a refund on this type of incentive.
In order to be considered, you must:
- Have a MAGI of less than $64,000 if you are an individual, or $128,000 if you are a couple.
- File a federal tax return as well as have some type of tax liability
- Not have claimed the American opportunity credit incentive.
One good thing about this kind of credit is that you can still be eligible even when you have been convicted on a drug felony charge.
Tuition and Fees Tax Deduction
This is a deduction that can reduce your taxable income by up to $4,000. In addition, this tax deduction is ideal for people who may have not qualified for the other two types of deductions we’ve mentioned earlier.
Here are the requirements:
- You must have a modified adjusted gross income (MAGI) of less than $80,000 or $160,000 if you are married and are filing jointly
- You are advised to use the deductions to offset the cost of tuition and fees as well as miscellaneous things such as book purchases, supplies and equipment needed for learning.
- These expenses should be for a student who is enrolled in one or more courses at a higher education institution that is eligible.
- You should only claim this deduction if you are married and file taxes jointly
- You may not claim a Tuition and Fees Deduction for the same student for the same year. However, you can divide these two between two students.
Whatever tax credits you decide to take, always make sure to adhere to the rules in order to have your request processed without a hitch. For more information on tax credits, please check out the National Association of Student Financial Aid Administrators website.