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Dunn-NC-CPA-Sanford-Fayetteville-Raleigh-Tax-Bookkeeping-Accountant Firms Discuss College Tax Breaks
If you are paying for yourself or a dependent to attend college, you should be aware that the tax laws do provide both tax credits and deductions for certain education expenses. Taking advantage of these could save you thousands each year.
The American Opportunity Tax Credit (AOTC) is available in 2010 for single individuals whose adjusted gross income (AGI) is under $90,000 and for married couples whose AGI is under $180,000. This credit allows you to reduce your tax liability dollar-for-dollar for qualified tuition and fees paid for the first four years of school. The maximum credit is $2,500, and even if you owe no tax the government will send you a check for 40% of the credit!
For those students who are beyond the first four years of college or who may be taking classes to enhance your career, the tax law provides a Lifetime Learning Credit. This credit also allows a dollar-for-dollar reduction in tax liability for tuition and fees paid for college classes. The credit is available to single filers whose AGI is under $60,000 and to married filers whose AGI is under $120,000.
Single filers with AGI under $70,000 and married filers with AGI under $145,000 can deduct up to $2,500 of student loan interest if the loan was used solely to pay the cost of tuition, room and board and other related expenses at a college, university, graduate or vocational school. This deduction can be claimed even if you don’t itemize your deductions on Schedule A!
As always, consult your tax advisor to see which of these you can take advantage of. If your income levels are close to the AGI limits it may be possible to do tax planning to ensure you get the maximum benefit from these college tax breaks.
Matthew A. Smith, CPA is a tax partner in the Dunn, NC office of Todd Rivenbark & Puryear, PLLC and can be reached at firstname.lastname@example.org or (910) 891-1100 x2215.
For more information visit us at: http://www.trpcpa.com
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Todd Rivenbark & Puryear, PLLC is a Certifed Public Accounting firm providing tax preparation, financial statements, audits, bookkeeping, payroll, estate planning, and other services to closely-held businesses and individuals in central and eastern NC.