4 Tax Breaks For Parents of College Students
Some parents begin saving for their child’s college education the moment they find out that they’re expecting. Even then, it still might not be enough. If your son or daughter isn’t an academic genius or an exceptional athlete, you may have to start applying for some student loans and encouraging your child to start applying for scholarships because college isn’t cheap!
Don’t worry. You’re not alone. Many parents are struggling to fund their child’s college education. But there are ways to get some of that money back. Believe it or not, it’s during the annual tax season where this opportunity avails itself. Here are 4 helpful tax breaks that parents can take advantage of if they’re paying for their child’s college education:
College tax credits reduces the amount of taxes you owe. There are two types of college credits offered: The American Opportunity Tax Credit and The Lifetime Learning Credit. With these credits, you can only take advantage of one every year, so you’ll need to select the one that’s going to be the most beneficial toward your tax filing.
The American Opportunity Tax Credit
– Some taxpayers may be more familiar with its former name, the Hope Credit. This credit reduces the amount of taxes you owe by $2,500 per eligible college student. This credit is available the first four years your child is enrolled in college. This is considered the better tax credit to take advantage of verses The Lifetime Learning Credit. But this is also contingent on your annual household income.
The Lifetime Learning Credit
– With this tax credit, you can possibly reduce your taxes by the dollar amount of $1,800 to $2,000. You can claim this credit for as many years your child is enrolled in college. So as long as you are supporting him or her, you’ll be able to take advantage of this credit should he or she decide to enroll in a masters and/or doctorate’s program.
Tuition and Fees
Think of it this way, almost any expense that you put toward your education within reason can be written off. The cash you spend on tuition and books is one of them. All you have to do is instruct your child to provide you with the receipts of all the books and supplies bought for school and have the Bursars’ office email you a pdf of the invoice, then save all of these documents in a folder labeled “college expenses”. When tax season rolls around, all you have to do is provide your tax preparer with the folder and he or she will take care of the rest.
Student Loan Interest
Even after college, if you’re still paying for your children’s student loans, then you should expect to receive a 1098 Form from that college that states the total amount of interest you paid on that loan for the prior tax year.
The practical expenses like room and board, transportation, parking, and tolls can all be written off as an expense on your annual taxes. You just have to make sure that your child is providing you with all of the documentation to support this. If you’re paying for it directly, then you’ll be able to acquire the receipt for these expenses.
There are plenty more educational tax breaks that you can take advantage of as a parent funding their child’s college fund. Contact Success Tax Relief to find out what they are. Our number is 877-825-1179. Email us or contact us through our website today!