January
15
Can someone explain the different education tax credits and deductions?
1 Comment | Under: Education Topic
I am starting my first year of school and have taken out ,000 in student loans. I am electing to pay the interest only payment on the loans, while I am in school, so the balance doesn’t increase.
Can anyone explain to me the different education tax credits that are available? Also, am I able to take a tax credit AND deduct the interest paid on my loans (We already deduct the interest on my husband’s student loans. He has been out of school for about 6 years now.) ?
Also, someone told me that I could deduct mileage for driving to school, is this true?
Any information on education related deductions and credits would be helpful, I am new at this. Thanks.
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January 15th, 2010 at 7:38 pm
There are a number of credits available for post secondary schooling. You might want to download Publication 970, Tax Benefits for Education, at irs.gov
Student loan interest can generally be deducted, although there are income limits on it. And yes, you can take a deduction for interest in the same year you are taking an education credit.
There are basically three different tax breaks for tuition and fees – Hope Credit, Lifetime Learning Credit, and Tuition and Fees Deduction. Each of the three has different rules, and while it’s possible to be eligible for all three, in any given year you can only take one of the three for the same student – you’d choose the one that gave you the most benefit. Hope Credit is only good for your first two years of post-secondary education, but usually (but not always) gives you more of a tax break that the other two. The credits usually, but not always, give you a better tax break than the deduction.
And finally, whoever told you that you could deduct miles for driving to school isn’t correct.