If you or someone in your household is taking college courses, you know how expensive higher education can be. Tax time is the perfect opportunity to help ease the burden. Even though the April 2011 tax deadline is still seven months away, you can start preparing now. Â (Or if you were granted an extension and have yet to file, take note.) With college tuition on the rise, you can ease the pressure on your wallet by tracking college expenses that might be eligible for a tax break. Here are a few deductions and credits that might help you put some cash back in your pocket.
Student loan interest deduction. Interest paid on student loans qualifies for a tax deduction. Be sure to keep the statement your lender sends you at the end of the year, which outlines how much you’ve paid in interest. You’ll need this to claim your deduction. In order to qualify, you must have a modified adjusted gross income less than $75,000 if you’re a single filer, and less than $150,000 if you’re filing a joint return.
Tuition and fees deduction. Up to $4,000 of tuition and fees for graduate and undergraduate courses is eligible for a tax deduction. The courses do not have to be toward a degree. Note that there’s a phase-out range depending on your income level. The range is $65,000 to $80,000 for single filers and $130,000 to $160,000 for those who are married and filing jointly.
American Opportunity Credit. This allows you to claim up to $2,500 for qualified educational expenses (tuition and related expenses required for enrollment or attendance) for each student. Eligibility for this credit is based on a modified adjusted gross income of less than $90,000 for single filers and less than $180,000 for those married and filing jointly.
Lifetime Learning Credit. This allows you to claim a credit up to $2,000 for quailed educational expenses. Undergraduate and graduate courses, in addition to courses to improve job skills, qualify for this credit. Eligibility for the credit is based on a modified adjusted gross income less than $60,000 for single filers and $120,000 for those who are married and filing jointly.
Need more tax advice? Read the Tax Insider each week for expert advice to keep more money in your wallet and the IRS off your back.
Sheiresa Ngo is the consumer affairs editor at Black Enterprise.