Acquiring a college education has been one of the top dream for most people. Parents would like to make sure that their children obtained the proper education. Education provides a lot of opportunities for students and families. But attending college can be very expensive so most students cannot really afford to go. So at every chance they can get, families and students resort to saving money, obtaining scholarships, acquiring grants or any form of financial help they can get. As an example, there are $5000 scholarship for accounting students offered if you are an accounting student needing help with your education.
Moreover, the government is cognizant of this big expense so they have given various tax breaks to families. When it comes to taxes, you will need to get as much tax help when it comes to filing your taxes.
Below are the Top Education Related Tax Credits and Deductions
American Opportunity Credit
This tax credit was started by President Obama as a means to assist low to middle income families. This credit is can be claimed by students who are attending the first four years of post-secondary institution. The amount of the credit is up to $2,500 for qualified expenses paid at a qualified institution. The student must be enrolled at least half-time of a normal academic load for at least one academic period in a program leading to a certificate,degree or other recognized educational credential. For most taxpayers, this credit provides the most tax benefit. However, this credit is only available through tax year 2012, unless the government extends the tax help again, and will return to the old Hope Credit.
Lifetime Learning Credit
You can receive an amount equal to $2,000 of credit per tax return (not per student) for qualifying expenses utilized for post-secondary education by you, your spouse and your dependents. Using this credit, there is no restriction on the amount of years that you can claim this. So basically, you can claim this even if the student is obtaining a master's degree, doctorate, or just attending college in order to enhance skills. Typically, you would only claim this if you are not eligible for the American Opportunity credit, or if the tuition and fees deduction provides fewer tax benefit to you.
Tuition and Fees Deduction
Tuition and Fees deduction can be taken directly on your tax return without itemizing. Students don't need to be enrolled half-time or full-time, so even taking one course can qualify you for this deduction. You can reduce your taxes by as much as $4,000 of deduction for qualifying expenses for a student who is in college institution. You usually cannot take this college tax deduction if you are already claiming the American Opportunity Credit or the Lifetime Learning Credit for the same student. Moreover, this credit is usually taken if you do not qualify on the other two education tax credits because your adjustments to gross income is bigger than the income limitations. Tax year 2011 may be the last year that this deduction will be offered.
Student Loan Interest Deduction
You can deduct up to $2,500 of interest paid for student loans used for post-secondary education if your adjusted gross income meet threshold. There is no need to itemize your return to benefit from this. But, this deduction is {gradually reduced as your income increases. Also, interest is deductible only for the first 60 months of paying back the loans. This tax incentive may change starting in the year 2013.