Hello, lifelong learners and supportive families!
As summer winds down and back-to-school season approaches, we all know that education costs can add up quickly. But did you know that there are tax benefits that can help ease the financial burden?
At LTL, we believe in maximizing your savings and making education more affordable. That’s why we want to highlight some valuable tax credits and deductions to help you recoup some of those education expenses.
American Opportunity Credit (AOTC):
This credit is designed for undergraduate students in their first four college years. It can be worth up to $2,500 per eligible student, and up to 40% of the credit may be refundable, meaning you could get money back even if you don’t owe any taxes.
To qualify, the student must be enrolled at least half-time in a program leading to a degree or other recognized educational credential. There are income limits, so check with your tax professional to see if you’re eligible.
Lifetime Learning Credit (LLC):
This credit is more flexible than the AOTC, as it’s available for both undergraduate and graduate students, and there’s no limit on the number of years you can claim it. It can be worth up to $2,000 per tax return for qualified tuition and expenses.
Unlike the AOTC, the LLC is non-refundable, which can only reduce your tax bill to zero. However, it can still provide significant savings for eligible taxpayers.
Deducting Student Loan Interest:
If you’re paying off student loans, you can deduct up to $2,500 in interest paid during the year. This deduction is available even if you don’t itemize.
Income limits apply, so be sure to check the IRS guidelines to see if you qualify.
Other Education-Related Tax Benefits:
- 529 Plans: These tax-advantaged savings plans can be used to cover qualified education expenses for kindergarten through college.
- Coverdell Education Savings Accounts (ESAs): Similar to 529 plans, these accounts offer tax benefits for saving for education expenses.
- Employer-Provided Educational Assistance: Some employers offer programs that help pay for education expenses, which can be a valuable benefit.
