Do you have kids in college? Or have you taken college courses to improve your job skills? The tax code has lots of ways to help you save on taxes, ranging from tax credits to deducting education expenses from your income. The IRS has an Interactive Tax Assistant that can help you determine what tax benefits you might be eligible for. We’ll also look at the whole picture for your family and figure out which tax breaks are the best for your situation.
The two tax credits, the American Opportunity Credit and the Lifetime Learning Credit both give you credits against your tax bill for tuition and required expenses such as books, equipment or supplies. The American Opportunity Credit is the most valuable but is only good for the first four years of college. This one is worth up to $2,500 per year, and up to $1,000 can be refunded to you. The Lifetime Learning Credit can be used any time after the first four years of college. It’s worth up to $2,000 per year and there’s no limit to the number of years it can be used. Both of these credits phase out at specific income levels, with higher levels for the American Opportunity Credit.
Instead of taking a credit, you can deduct up to $4,000 of education expenses from your taxable income. For some situations, this is the best way to go. And after school’s over, you can deduct up to $2,500 for student loan interest. Call our office today and we’ll help you with a strategy to maximize your tax savings for college expenses!