For the week of February 25, 2013
Often, institutional scholarships awarded to accepted students (based on their talent, financial needs, high school grades or ACT/SAT scores) only cover a percentage of college costs. Financial Aid Insider offers tips and information about lesser-known sources of student financial assistance.
This issue: Educational Tax Benefits
- A tax credit reduces the amount of income tax you may have to pay.
- A deduction reduces the amount of your income that is subject to tax, thus reducing the amount of tax you may have to pay.
- Generally, only one tuition credit or deduction may be utilized per student per year.
The full $2,500 credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. This credit can be used for each child in college, and is set to expire in 2017.
Get more information.
Lifetime Learning Tax Credit
For the tax year, you may be able to claim a Lifetime Learning credit of up to $2,000 for qualified education expenses paid for all students enrolled in eligible educational institutions. There is no limit on the number of years the lifetime learning credit can be claimed for each student. However, a taxpayer cannot claim both the American Opportunity credit and Lifetime Learning credit for the same student in one year.
Get more information.
Tuition and Fees Tax Deduction
This deduction can reduce the amount of your income subject to tax by up to $4,000. Reported on Form 8917, it is taken as an adjustment to income. This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). This deduction may be beneficial to you if, for example, you cannot take the lifetime learning credit because your income is too high. Questions? Visit www.irs.gov
Student Loan Interest Deduction
There is a special deduction allowed for paying interest on a student loan.
Learn more.
We hope this information will be useful in your college financial aid planning. In next week’s Financial Aid Insider, we’ll discuss Federal Direct Loans. Call us with questions at (800) 593-2885. We look forward to assisting you.
The LaGrange College Admissions & Financial Aid Team
finaid@lagrange.edu
(800) 593-2885
