Tax benefits for college

News

ROCHESTER, N.Y. (WROC) — CPA Matt Bryant discussed some tax benefits for college Monday during News 8 at Sunrise.

Bryant first discussed the American Opportunity Tax Credit. “This credit is available for the first four years after high school,” he said. “It’s a credit up to $2,500 each year that can be used to offset tuition, books, fees, and related costs of college.”

Bryant said if the student is a dependent, the parents will usually claim the credit. However, if the student is independent, the student will claim the credit themselves.

If you’re looking to get a master’s or doctorate there is the Lifetime Learning Credit. “It’s available for any year you have college or post-secondary education,” Bryant said. “So if you’ve used American Opportunity credit, you can continue using the Lifetime Learning Credit.”

The Lifetime Learning Credit can be used every year in which you take post-secondary classes without limit. “For the American Opportunity credit, you have to be at least half time of a normal course of study for one period during the academic year,” noted Bryant. “On the other end, for Lifetime Learning credit, there are no minimum requirements.”

These are available for any post-secondary education from a qualified institution. “So if you want to go back to a trade school or vocation school, you can use these credits for those,” said Bryant. “There are phase-out income limitations that start around $140,000 for a married couple. So as long as you’re below that, you’ll be able to take these credits.”

Bryant said there are considerations for after college as well. “If you’ve taken out loans, there is an adjustment for up to $2,500 for student loan interest paid each year,” he said. “Now this is an adjustment, not a deduction. So even if you take a standard deduction, you still can claim the student loan interest adjustment.”

At the other end of the spectrum, Bryant said the New York 529 plans are a great vehicle to use. “You can put funds in there. The earnings are tax-free and then when you take money out, it’s a tax-free distribution as well. It’s a great option to save for college and the future.”

For more “Smart Money” advice, visit nysscpa.org/getmoneysmart.

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