Let the IRS Help Pay for Your Higher Education

IRS pay for collegeThe cost of getting an education has never been higher. But by taking advantage of some tax benefits that Uncle Sam provides, you can at least put a small dent in some of those costs.

Unfortunately, figuring out which tax benefits apply can be complicated. Let's take a look at the many provisions that help college students.

American Opportunity Tax Credit

Students can get a credit of up to $2,500 for each of the first four years of a college education. If you earn less than $90,000 as a single person or $180,000 if you file jointly, then you can claim 100% of the first $2,000 and 25% of the next $2,000 you pay on your tuition, fees, and other qualifying expenses.

Up to $1,000 of the credit is refundable, meaning that even if you don't otherwise owe tax, the IRS will cut you a check for that amount. These provisions are temporarily higher through 2012, after which they're scheduled to get cut back.

Lifetime Learning Credit

In addition to the American Opportunity Tax Credit, the Lifetime Learning Credit offers 20% back on the first $10,000 of annual educational expenses paid. Different income limits apply, though, with the benefits completely phased out at $62,000 of income for singles and $124,000 for joint filers.

The Lifetime Learning Credit doesn't have to be used for the first four years of college, however. It's available for graduate school as well as job training and other classes taken to acquire or improve job skills. Note, however, that you can't claim both credits for the same student in the same year.

Tuition and Fees Deduction

Students are entitled to a deduction of up to $4,000 for educational expenses. This is a deduction rather than a credit, but it comes with higher income limits than the Lifetime Learning Credit -- $80,000 for singles and $160,000 for joint filers.

Sponsored Links
Depending on your tax bracket and how much you spent on education, the deduction may be a better bet than the credit. Note, though, that you can't claim both this and one of the two credits above.

Student Loan Interest Deduction

Even if you're done with school, you may be able to deduct interest you pay on your student loans. If you're single and earn $75,000 or less ($150,000 for joint filers), then you can deduct up to $2,500 in student loan interest every year.

To qualify, you need to have been enrolled at least half-time when you took the loan. Also, the money must have gone toward tuition and related expenses, which include room and board.

Get Your Fair Share

Each of these provisions has its own additional requirements, so you'll want to consult with a tax professional or do further research to learn more. However, when it comes to paying for college, every little bit helps, so stake your claim to Uncle Sam's tax benefits this year.

More on taxes:

A Tax Filing Factsheet for eBay Sellers

You can find almost anything for sale on eBay, from a piece of fine art to clippings of Justin Bieber’s hair. So it's no surprise that the IRS doesn't view all sellers alike in the online marketplace. You may not have to pay tax at all if you are essentially hosting an online garage sale, but if you run your eBay account more like a business, you should be reporting your sales to the IRS.

Read More

Brought to you by TurboTax.com

Video: The Alternative Minimum Tax (AMT) Explained

Originally created to make sure the wealthy paid taxes even after using tax breaks and loopholes, the Alternative Minimum Tax (AMT) has never been updated and continues to impact middle class Americans more and more each year as a result of inflation. To compensate for inflation, the AMT now includes an exemption amount. This exemption is indexed for inflation so it changes every year.

Read More

Brought to you by TurboTax.com

Should You and Your Spouse File Taxes Jointly or Separately?

Married couples have the option to file jointly or separately on their federal income tax returns. The IRS strongly encourages most couples to file joint tax returns by extending several tax breaks to those who file together. In the vast majority of cases, it's best for married couples to file jointly, but there may be a few instances when it's better to submit separate returns.

Read More

Brought to you by TurboTax.com

Tax Tips for New College Graduates

Before you climb that first rung of the career ladder, there are some basic rules to understand about income taxes. Think of it as Taxes 101.

Read More

Brought to you by TurboTax.com
Read Full Story