Tax Deductions 101: Save on Tuition, Fees, and Student Loan Interest
| July 28, 2017 | back to school, deductions, education, ExpressExtension, Student Deductibles, student loans, Student Taxes, tuition, tuition and fees | No Comments
Summer break is quickly passing us by and before you know it, it will be time to send the kids back to school or even return to school yourself to complete your higher education journey. Tuition and other expenses associated with obtaining a degree or diploma can become costly. Luckily, if you meet certain requirements, you can deduct some of these expenses when filing your taxes annually.
Tuition and Fees Deduction
Deductions can be made during tax filing season for qualified tuition expenses and other related expenses that are paid for your education or the education of a spouse or dependent. No itemization is required for this deduction. Simply claim the deduction as an adjustment to your income when filing IRS Form 1040.
Other education benefits for education expenses include:
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American Opportunity Tax Credit or the Lifetime Learning Credit
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Itemized Business Deduction for Work-Related Education – Take a quick questionnaire to see if your work related educational expenses can be deducted. (https://www.irs.gov/individuals/tax-trails-are-your-work-related-educational-expenses-deductible-10)
If your expenses qualify for both a business expense deduction as well as the tuition and fees deduction, you can only claim one deduction and not both.
Tuition and Fees Deduction Requirements
The Tuition and Fees Deduction can NOT be taken if one of the following occurs:-
Your filing status is married filing separately
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You can be claimed as a dependent on someone else’s return
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Your modified Adjusted Gross Income exceeds certain limits
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You claim the American opportunity tax credit or Lifetime Learning Credit for the same student in the same tax year
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You or your spouse were a nonresident alien for any part of the tax year.
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Expenses were paid with tax-free scholarships, grants, or education savings account funds, tax-free savings bond interest, or employer-provided education assistance.
Student Loan Interest Deduction
Student loan payments are never fun. But there is some good news if you do have one! Those that are required to make student loan payments can easily make a deduction for these costs each year. The first step is verifying if your loan qualifies for the deduction. A qualified student loan is one that was taken out solely to pay the expenses to attend a qualified institution of higher education. Student Loan Interest is considered to be any interest paid during the year on a qualified student loan, including required and voluntarily prepaid interest payments. Deductions for these loans can either be $2,500 or less or the amount of interest actually paid during the year can be claimed as an adjustment to your income, so no itemization of the deduction is needed.
Student Loan Interest Deduction Requirements
In order for the deduction to be claimed, you must meet the following requirements:
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Paid interest on a qualified student loan in the current tax year
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Are legally obligated to pay interest on a qualified student loan
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Filing status is not “married filing separately”
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Modified Adjusted Gross Income is less than a specified amount that is set annually
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You or your spouse, if filing jointly, can’t be claimed as dependents on someone else’s return.
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Those that paid $600 or more of interest on a qualified student loan during the year will receive a Form 1098-E (Student Loan Interest Statement) from the entity to which the student loan interest was paid. Keep this form and use the information listed on it when filing.
As you prepare to continue furthering your education, be sure you take advantage of these great deductions when filing. As always, ExpressExtension is here to provide you with any automatic filing extensions that you may need when that hectic time of year comes around. Feel free to contact us if you have any questions or need assistance with filing. We are available Monday – Friday from 9AM to 6PM EST at 803.514.5155. Live chat and 24/7 email support is also available at [email protected]. We look forward to assisting you!
