The 2013 tax season is here and it is important to take advantage of tax benefits for education. The Internal Revenue Service (IRS) provides education benefits which include tax credits, deductions, and savings plans which can help with expenses for higher education. The tax benefits can be used to get back some of the money you spend on tuition or loan interest or to maximize your college savings (FSA). These incentives come in a couple of forms: Tax Credits, which directly reduce the amount of tax you are liable for; and Tax Deductions, which reduce the amount of income on which you pay taxes.
The IRS offers a variety of tax benefits which include: Education Tax Credits, American Opportunity credit, Lifetime Learning Credit, tuition and fees deduction and student loan interest deduction. The Education tax credits can help offset the costs of education. The American Opportunity (Hope Credit extended) and the Lifetime Learning Credit are education credits you can subtract in full from the federal income tax, not just deduct from taxable income. Tuition and fees tax deduction can reduce your taxable income by as much as $4,000 and may benefit you if you are not eligible for any of the tax credits. The student loan interest deduction allows you to deduct interest paid on student loans for yourself, your spouse, or your dependents.
You will receive information about your educational expenses in a 1098-T statement from the institution of higher education you attended. Schools are required to send this information to each student and to the IRS by Jan. 31, 2014. (You might receive this by mail or electronically. Be sure to save this information, or give it to the person who claims you on their tax return if you don’t claim yourself.) Some schools report only tuition and fees on this form. If your 1098-T doesn’t include amounts you paid for course-related books, supplies, and equipment, and these expenses are covered by the tax benefit you are taking, you can use your records to calculate the amounts paid for these items and report this amount on your tax return. If you have any question regarding your 1098-T you may contact your schools financial aid office. At American Public University our Student Accounts Department can assist you with any questions regarding your 1098-T. You may contact them at email@example.com or 1-877-468-6268 ext 3660.
You may qualify for more than one of these incentives, but there are some restrictions. To see which federal income tax benefits might apply to your situation you may review the IRS Publication 970, 2013 Tax Benefits for Education . If you need further assistance to help determine if you’re eligible for education credits or deductions, including the American opportunity credit, the Lifetime Learning Credit and the tuition and fees deduction, you may use the IRS’s Interactive Tax Assistant .
Information on higher education tax breaks retrieved from National Association of Student Financial Aid Administrators (NASFAA) and Internal Revenue Service (IRS).
By Shalena Gonzales
Financial Aid Specialist, American Public University