Dorm, sweet dorm. After organizing your college student’s new digs, it’s time for an extra credit assignment: sorting out the education benefits you can claim on your 2013 federal income tax return.
In general, tax breaks for education fit into three broad categories.
- Deductions, such as qualified tuition and fees and student loan interest, reduce your gross income. These are called “above the line” deductions because you can claim them even if you’re not planning to itemize deductions.
- Exclusions from income include amounts you use for educational expenses that might otherwise be considered taxable, such as scholarships, or certain withdrawals from your individual retirement account. Interest you receive on savings bonds that you redeem and spend on qualified educational expenses may also be excludable from income.
- Credits. The American Opportunity Credit and the Lifetime Learning Credit are effectively treated as payments on your return, and offset the tax you owe. The American Opportunity Credit is partially refundable, which means you can receive a refund even when you owe no tax.
You might also benefit from other education tax breaks. For example, if your child is between the ages of 18 and 24 and a full-time student, you may be able to claim a dependency exemption ($3,900 for 2013).
Give us a call. We’ll help you make sure you get that extra credit, deduction, or exclusion.