The Benefits of Higher Education
Tax Options Explored
Earning a diploma is costly, time consuming, and hard work. Committed students usually see their education through to the end, but at some point, funding tapers off and money becomes an obstacle. Whether you are in your first year of college or your fourth, there are tax benefits available to either you or your parents that can significantly reduce the cost of college tuition. Investigating your options is the only way to make sure that you are taking advantage of the tax benefits available to you.
The Hope Credit, the Lifetime Learning Credit, Student Loan Interest Deduction, and a Tuition and Fees Deduction are some of the main ways that students and parents receive tax benefits. Each option has different advantages so it is important to research each thoroughly so that you choose the most rewarding tax benefit. Below is a summary of the information provided in IRS Form 970. Note that there are exemptions for each option and eligibility requirements that must fulfilled. If you are above a particular income bracket you may not qualify for education deductions or credits.
The Hope Credit allows students who claim themselves or parents of a college student to claim a $1500 tax credit each year. This credit option is only available during the first two years of post-secondary education. Students must be enrolled at part-time or full-time status to qualify.
Note: The Hope Credit should not be confused with the Hope Scholarship which, although another well-known source of college funding, is not tax-related. The Hope Scholarship is a merit-based, lottery-funded, and state-dependent form of college aid. Once known for being the Georgia Hope Scholarship, it has now spread to other states. The South Carolina Hope Scholarship, Maryland Hope Scholarship, and Tennessee Hope Scholarship funds are quickly gaining in popularity. If you are not from Tennessee, perform a free scholarship search at Scholarships.com to see if an award similar to the Tennessee Lottery Scholarship is available in your state. If you are, conduct a free search because it's free and who knows what other scholarships, grants or fellowships you might qualify for?
Lifetime Learning Credit
The Life Time Learning Credit allows eligible students to claim a $2,000 tax credit each year. Unlike the Hope Credit, students can claim this credit throughout their entire college career—be it 2 years or 6. Students must be enrolled in at least one class to qualify.
Student Loan Interest Deduction
This reduction allows eligible participants to reduce their taxable income by $2,500 each year. The loan cannot be taken from a relative or employer and its purpose must be purely educational. Interest paid throughout the life of the loan can be deducted until the debt is absolved.
Tuition and Fees Deduction
This tax option can reduce your taxable income by up to $4,000. This deduction is solely for tuition and fees; it does not include any other expenses associated with school like room and board. For more detailed information about the tax benefits of higher education, visit the Internal Revenue Service website.
Latest College & Financial Aid News
July 26, 2016
by Susan DutcaNative American students lag behind their peers from a young age, across almost every measure of student success. From college enrollment, to test scores and on-time graduation, they have the lowest rates of any racial subgroup. They make up a mere 1 percent of the high school and college population and tend to be overlooked when it comes to discussion about the nation's achievement [...]
July 21, 2016
by Susan DutcaColleges and universities across the nation are starting to engage more in discussions regarding what it means to be a man. Masculinity, just like femininity, is celebrated through these gender-specific scholarships. So man-up and check out these scholarship opportunities!: Colored Rocks Contest [...]
July 20, 2016
by Susan DutcaPresident Obama gets paid $400,000 per year to serve as President of the United States of America. Many college presidents get paid more for running a school than they would for being the leader of the free world, according to a new report from the Chronicle of Higher Education. Presidents at public universities received a median salary of $431,000 in the 2015 fiscal year, with a 4.3 percent [...]