Above the line deductions reduce your taxable income and ultimately lowers your adjusted gross income. To qualify for the deduction, the student loan on which you paid interest must be a commercial loan taken out exclusively for the purposes of paying for education.
The loan may only apply to a student who is enrolled at least half-time in a degree program. The student must be you, your spouse, or your dependent. Qualified expenses for the Student Loan Interest Deduction are the total costs of attending an eligible educational institution including graduate school.
An eligible educational institution is a school offering higher education beyond high school. It is any college, university, trade school, or other post secondary educational institution eligible to participate in a student aid program run by the U.
Department of Education. This includes most accredited public, nonprofit, and privately-owned—for-profit postsecondary institutions. If you are not sure if your school qualifies, you can ask or see if your school is listed here.
Simply start a tax return on eFile. If you take the Tuition and Fees Deduction and you have also paid interest on student loans, you may be able to take the Student Loan Interest Deduction as well.
The Tuition and Fees Deduction is an above-the-line deduction, so you do not need to itemize to claim it on your Tax Return. Why worry about figuring out if you qualify or not?
If you pay the expenses with money from a loan, you take the credit for the year you pay the expenses, not the year you get the loan or the year you repay the loan. Qualified expenses are amounts paid for tuition, fees and other related expense for an eligible student that are required for enrollment or attendance at an eligible educational institution.
Eligible expenses also include student activity fees you are required to pay to enroll or attend the school. For example, an activity fee that all students are required to pay to fund all on-campus student organizations and activities. For AOTC only , expenses for books, supplies and equipment the student needs for a course of study are included in qualified education expenses even if it is not paid to the school.
For example, the cost of a required course book bought from an off-campus bookstore is a qualified education expense. Even if you pay the following expenses to enroll or attend the school, the following are not qualified education expenses:.
Independent students and parents can qualify for the AOTC if they paid for qualified education expenses used for undergraduate courses. The LLC, on the other hand, is a nonrefundable tax credit. One useful tax break for college graduates and their parents is the student loan interest deduction. Our opinions are our own. Here is a list of our partners and here's how we make money.
If you paid for college in the last year, you may be able to claim the American opportunity credit or lifetime learning credit, or the the tuition and fees deduction.
The American opportunity credit is generally the most valuable education tax credit, if you qualify. You can claim these education tax credits and deductions even if you paid for school with a student loan. Parents can take advantage, too, so long as they don't choose a married filing separately status.
Here's what to know about each option. Who can claim it: The American opportunity credit is specifically for undergraduate college students and their parents. You can claim the credit on your taxes for a maximum of four years. Is the American opportunity credit refundable?
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