By Mandi Woodruff
A recent report by the New York Federal Reserve Bank shed a sobering light on how much debt Americans will carry with them into the new year.
Though they managed to end the third quarter of 2012 with a $74 billion lighter debt load overall, consumers upped their non-mortgage credit debt by another $2 billion and took on $42 billion in new student loans.
Heading into tax season, it's the student loan figure that is possibly most troubling. It was only last spring that the U.S. Government Accountability Office found Americans managed to leave behind nearly $800 million worth of college tuition tax benefits in 2009 -- an average of $466 per person.
With the national student debt already past the $1 trillion mark, we figure now is a good time to revisit some of the most lucrative tax breaks out there for college students.
• American Opportunity Credit. Students are eligible to claim up to $2,500 for the first four years of post-secondary education. And since 40 percent of the credit is refundable, that means students can get back up to $1,000 on their refund -- even if they don't owe any taxes, according to the IRS. What qualifies: Tuition and fees, course related books, supplies and equipment. Income: Couples filing jointly who earn less than $160,000; single-filers who earn less than $80,000.
• Lifetime Learning Credit. For students earning less than $60,000 (single-filers) or $120,000 (married, filing jointly), they can claim up to $2,000 education-related expenses.
• Tuition and fees deductions. Like the American Opportunity Credit, students earning less than $80,000 (single) or $160,000 (married, filing jointly) can deduct up to $4,000 in tuition and fees on their annual tax returns. Use it while you can -- this tax break is set to expire at the end of 2013, unless lawmakers extend it.
• Student loan interest deduction. If you've taken out a federal or private student loan, you're eligible to deduct up to $2,500 worth of interest paid on the loan as an "above-the-line" exclusion from your income. You don't have to itemize your deductions in order to claim it.
Note: College students can only claim one of the above tax credits per year, but parents supporting more than one child in college can claim tax credits on a per-student basis.