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Uncle Sam Wants You (to go back to school) and he’s willing to give you a tax break for it.

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It’s tax season again and the New York Times ran a story recently on possible tax breaks for non-traditional students.  How you pay tuition, where and how much you attend school, and your income affect your eligibility for these tax breaks.  The following is a summary of the tax credits that might be available to older college students:

LIFETIME LEARNING CREDIT.  You can take this credit even if you are only taking one class and not pursuing a degree provided you are enrolled in a qualifying institution.  The credit may be taken for 20% of tuition and fees, up to a $2,000 maximum on $10,000 in expenses.  For 2012, the credit phases out for single people earning more than $52,000 and married couples earning more than $104,000.

AMERICAN OPPORTUNITY CREDIT.   While this credit is mostly taken by parents paying for their children’s undergraduate education, returning adult students may qualify for it as well.  You may take a $2,500 credit per student credit for tuition, fees, and course materials for the four years of an undergraduate degree.  You cannot take this credit for graduate school or courses not leading to a degree.  Singles with incomes above $80,000 and married couples who earn more than $160,000 may not take this credit.

 TUITION AND FEES DEDUCTION.  If you don’t qualify for either of the above credits due to income or other factors, you may qualify for this income deduction.  If you are single and earn less than $80,000 or married and earn less than $160,000, you can take a $4,000 deduction for yourself or a dependent.  There are no restrictions on the number of years it can be taken and it does not matter if you attend full- or part-time.

If you pay your tuition and fees with money from a 529 or Coverdell account, you may not take any of these tax credits or deductions as well. (no “double-dipping”).

 You can read the New York Times article in its entirety at this link:

http://www.nytimes.com/2013/03/19/education/tax-code-helps-continuing-education-students-with-costs.html?ref=nationalspecial2&_r=0

 IRS Publication 970 contains information about educational deductions and can be found at the following link:

http://www.irs.gov/pub/irs-pdf/p970.pdf

You may want to consult with a tax professional regarding educational tax credits and deductions.

 


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