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College tax breaks

Local News

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.”

Staebell noted there are limits to the credits and deductions. “There are phase outs to high incomes, and they all have different phase outs,” she said. “There’s differences on what kind of expenses qualify for each one, so there is a bit of planning and research involved for sure.”
 
It worth noting, you cannot claim both the credit and deduction, but you can claim the student loan interest deduction. “At the end, once you’re done with college and you start paying back any student loans you did incur to pay for college, you can get up to twenty-five hundred dollars deductions on student loan interest,” said Staebell.
 
If you have more than one child in college, each child can take a different deduction on the tax return, but the same child cannot take two different deductions noted Staebell. “Do your research or hire a professional. We know all the ins and outs, and CPAs like myself, can help you find the best bang for your buck so you’re not leaving money on the table.”
 
For more information, visit the NYSSCPA website, click here.
 
 
 
 

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