CPA Michelle Staebell of the New York State Society of CPAs discussed different tax breaks for college Monday during News 8 at Sunrise.
“There are a bunch of different tax credits,” Staebell said. “One of the most popular ones right now is the American Opportunity Tax Credit. It’s a credit of twenty-five hundred dollars on four thousand for qualified education expenses. It’s a great credit. It’s worth twenty-five hundred dollars on the first four years of college, and some of that is refundable. It’s an amazing opportunity for those who qualify for it.”
Staebell said it’s a credit so it’s a dollar-for-dollar reduction on taxes. “If you owe three thousand dollars on your taxes, and you have a twenty-five hundred dollar credit, you only owe five hundred dollars. Again, it’s refundable, so if you owe less than twenty-five hundred dollars, you could get a refund check in the mail relating to that credit.”
There are tax credits for grad students as well. “If you’re past the first four years of college, there’s a different credit available,” said Staebell. “It’s called the Lifetime Learning Credit. On the first ten thousand dollars of qualified expenses, the credit is only two thousand dollars. It’s not refundable, but also a good option if you take advantage of that instead of the first four years of college.”
For deductions, if you can’t take advantage of either of the credits, you can have what’s called an Above the Line Deduction Staebell said. “It reduces your taxable income. You don’t get as big of a bang for your buck but it does help. It’s a four thousand dollar potential deduction that reduces your adjusted gross income, which is before you calculate the tax.”