Tax credits for college expenses!

While it is the time to file the financial aid applications, it is also the time to be concerned about tax filing and some of the tax "breaks" you can get by the payment of tuition, fees and other qualified educational expenses. Below is an article out the of the NYSFAAA Winter Newsletter regarding the tax credits. The article is written by Tasha McDaniel of the Great Lakes High Education Corporation.

Taxes make almost everyone cringe. Help make this
year’s tax day a more positive experience by brushing
up on education tax benefits. Sharing information on
the ins and outs can help you make sure your students
and families claim everything they are eligible for.
According to the IRS, over 16.3 million taxpayers were
able to reduce their taxes through one or more
education tax benefits in 2006. There are two different
types of benefits: credits and deductions. Credits
directly reduce the amount of taxes paid and
deductions directly reduce taxable income.

Hope Tax Credit
The Hope credit offers up to $1,800 per student. It
covers tuition and fees—100% of the first $1,200 and
50% of the next $1,200—and can be used for the first
two years of undergraduate education. Independent
students, families claiming dependent students, and
married students are eligible when their income is
between:
• $48,000 and $58,000 for single tax filers
• $96,000 and $116,000 for married filers filing
jointly
No credit is received for:
• Single filers with an income exceeding $58,000
• Married filers filing jointly with an income
exceeding $116,000
• Married filers filing separately
Families can claim a separate Hope credit for each
student who qualifies. For example, a family with two
dependent students in their first or second year of
college can claim up to $3,600 in Hope credits. To claim
the Hope credit, use IRS Form 8863.

Lifetime Learning Credit
The lifetime learning credit offers up to $2,000 for each
year you pay for college. It covers 20% of the first
$10,000 of tuition and fees paid by the family. The
credit is available for those who are not eligible for the
Hope credit and is applied when income is between:
• $48,000 and $58,000 for single tax filers
• $96,000 and $116,000 for married filers filing
jointly
No credit is received for:
• Single filers with an income exceeding $58,000
• Married filers filing jointly with an income
exceeding $116,000
• Married filers filing separately
The credit can be claimed only once per tax return,
which means the credit is always $2,000, even for
families with more than one dependent student. It
is also available for less than half time study to
acquire or improve job skills and can be used by
graduate and undergraduate students for an
unlimited number of years.

Tuition and Fees Federal Tax Deduction
The federal tax deduction for tuition and fees can
reduce your income by up to $4,000. Students and
families can claim the deduction if they pay
qualified education expenses of higher education,
they pay the education expense for an eligible
student, or the eligible student is themselves, their
spouse, or a dependent student for whom they
claim an exemption on their tax return. Qualified
education expenses include tuition and fees
required for enrollment or attendance at an eligible
postsecondary institution. To claim the deduction,
complete form 8917 and submit it with Form 1040
or 1040A.

Student Loan Interest Deduction
The federal deduction for student loan interest
offers up to a $2,500 deduction. Independent
students, families with one or more dependent
students, and married students may be eligible for
this deduction during any year in which they paid
interest on a student loan. The deduction is
available for both undergraduate and graduate
students, and students must have been enrolled at
least half-time in a degree program. The maximum
deduction is reduced when income is between:
• $55,000 and $70,000 for single tax filers
• $110,000 and $140,000 for married filers filing
jointly
No credit is received for:
• Single filers with an income exceeding $70,000
• Married filers filing jointly with an income
exceeding $140,000
• Married filers filing separately
Qualified education expenses include: tuition and
fees, books and supplies, room and board,
transportation, and other necessary expenses.
For more information about education tax benefits,
consult IRS Publication 970.