Tax Breaks for College Students

If you’re currently in college, are about to be in college, or have ever even driven by a college, you know that getting an education is extremely expensive these days. Even at in-state rates in public universities, you’re still paying at least $30,000 just to go to college, and that’s on the cheap end! If you go to a top ten school, you could easily pay $100,000 over the course of your college career, and if you’re going for an advanced degree, it only gets worse from there. In order to pay for all of this, most students need a combination of work, scholarships, help from their parents, and yes, tax breaks.

Fortunately there are plenty of tax deductions and tax credits that college students can make use of to make their education much less expensive. For freshmen and sophomores, there’s the Hope Tax Credit. You can use this to deduct up to $1,650 for each student in the family. To take advantage of this credit, you have to be within your first two years of school, have to be in a degree seeking program, are at least taking half of a full load of courses, and are free of any felony conviction for possessing or distributing a controlled substance. Qualifying expenses include school tuition and fees minus any scholarships. This tax credit does not cover room, board, insurance, transportation, or textbooks.

When you’re a junior or a senior and you no longer qualify for the Hope Tax Credit, you can make use of the Lifetime Learning Tax Credit. You can get a tax credit of 20% of the first $10,000 paid for qualified expenses for you, your spouse, or your children. There’s a maximum of $2000 for all students in the family. This tax credit is not based on the students workload, can be used for expenses for graduate-level degree work, has no maximum number of years that you can use, and does not increase based on the number of students in your family.

In order to claim either of these tax credits, you’ll need to file using the 1040 or the 1040A tax forms, and attach Form 8863 (Education Credits). Itemizing your expenses to receive these tax credits is not required.

It gets better after graduation. If you had to take any student loans out, you can deduct up to $2,500 in interest that you pay on your student loans annually. In order to qualify for this, you have to have paid more than $6000 in interest on a qualified student loan. You should receive Form 1098-E from the financial institution holding your loan.

Those are the three primary tax benefits for people going through college. If college is a ways away, you should consider saving money in a Coverdell Education Savings Account or a 529 college savings plan which are both very tax beneficial.

Don't give up your dreams of a College Degree. If you don't feel like you have the time or money to go back to College, there is still hope with the help of an Online College. Choosing to take Classes Online can help you reach your educational goals.