Are you working on getting your finances in order by taking a personal finance course this semester? There are many things your professor won’t tell you about your taxes that can help improve your personal finances. Jackson Hewitt can help you round out your education with these tips:
You may qualify for a tax credit for the cost of your tuition and fees as a college student. There are many different types of tax benefits available starting with the most common one, the American Opportunity Credit. This credit is partially refundable which can increase your tax refund. The credit is worth up to $2,500 per student with 40 percent of the credit, up to $1,000, allowed as a refundable credit. The balance of the credit is a nonrefundable credit and is used to reduce your tax liability to zero so your withholding and refundable credits can be issued as a refund. You must be a more than half-time student in your first year of a four-year degree or certificate program and must not have a conviction for a felony drug offense. In addition, you must be attending an accredited institution. Most colleges and trade schools that qualify for the federal student loan program are accredited institutions.
If you are attending school less than half time, for continuing education to maintain your credentials, or just to learn something new, you may be eligible to claim the Lifetime Learning credit as well. This credit allows a credit of 20 percent of the cost of tuition and fees, up to a maximum credit of $2,000 paid to a college or trade school. This credit is nonrefundable only, which means you can reduce your taxes with the credit, but you can’t claim any remaining credit as a refund. You don’t have to be enrolled in a degree or certificate program, can be in school beyond the first four years of your education, and there is no restriction if you have a felony drug charge.
If you are taking a course to maintain your knowledge for your job or to maintain your credentials and you don’t qualify for the American Opportunity or Lifetime Learning credit you may qualify for the Tuition and Fees deduction. While this is a deduction and doesn’t lower your taxes as far as the credit do, you can use the deduction to lower your taxes. You may claim a deduction of up to $4,000 if you paid tuition and fees expenses for yourself, your spouse, or a dependent.
So many students are unable to complete their education without the aid of Student Loans. You may be able to deduct up to $2,500 of the student interest you paid during the year as an adjustment to income. You may claim the student loan interest deduction and either one of the credits or the Tuition and Fees deduction in the same year.
Finally, if you are the beneficiary of a state sponsored college savings plan you may have to pay taxes on funds withdrawn and not used for qualified expenses such as tuition, required fees, books and supplies. Students who are at least half-time may also include room and board expenses.