Student Loan & Consolidation Tax Credits and Deductions
Student loan and student loan consolidation borrowers must be aware of the tax credits and deductions available to them, this information is literally worth thousands of dollars. In this article we go over the different tax credits and deductions available for student loan and student loan consolidation borrowers.
This year student loan tax credits and deductions have been increased and here are some facts you need to keep in mind when filing your return.
Hope and Lifetime Learning Education Credits: These are two popular
credits that help supplement the cost of education. The Hope Credit
allows up to $1,650 per student for qualified tuition and fees paid
during the first two years of higher education. The Lifetime Learning
Credit is available for 20% of tuition expenses (up to $2,000) per tax
return for any courses students take (such as those to acquire or
improve job skills). The cap for both credits increases to $57,000
($114,000 if Married Filing Jointly) this year.
Tuition and Fees Deduction: An alternative to the Hope Credit or
Lifetime Learning Credit, this deduction covers up to $4,000 in
expenses for enrollment or attendance at an eligible educational
institution. This deduction is available to those with a modified
adjusted gross income of $65,000 or less ($130,000 or less if Married
Filing Jointly), but no more than $80,000 ($160,000 if Married Filing
Jointly).
Coverdell Education Savings Accounts: This account, which functions
like an education IRA, can be established for a child under the age of
18. Contributions can be made to the account at any time but have an
annual limit of $2,000. The investment appreciates tax-free as long as
it is used to cover education expenses.
Education Savings Bonds: A taxpayer can exclude interest on qualified
U.S. savings bonds from gross income if he or she has paid qualified
higher educational expenses during the redemption year. Remember that
there are income limits: you do not qualify for the exclusion if your
modified adjusted gross income for 2007 is greater than $65,600
($98,400 if Married Filing Jointly) in the year the bond is redeemed.
Once a course of study is completed and a loan is paid off borrowers can receive deductions of up to $2,500 in 2007. A borrowers modified adjusted gross income must be less than $70,000 or $140,000 if filing jointly to qualify for this deduction.
It is also a good idea to pre-pay your 2008 tuition before December 31, 2007 to increase the amount that can be claimed under the Hope or Lifetime Learning Credits and Tuition and Fees deductions.
Thanks to Jackson Hewitt for all of this great information. The only way to know if you are getting all of the deductions and credits that you are eligible for is to work with a professional like Jackson Hewitt. You can locate a Jackson Hewitt office near you by calling 1-800-234-1040.
