Are you or a dependent student enrolled in higher education? Are you aware you can deduct a portion of your paid college expenses on your tax return? Here is a quick overview of the three main higher education tax breaks.
American Opportunity Tax Credit (AOTC):
This credit, originally known as the Hope Scholarship credit, is extended through 2017. The deduction limit is $2,500 for an individual and $500 per family and is available for four years per individual.
Additionally, the AOTC for 2015 is phased out for single filers with incomes between $80,000 and $90,000 of modified adjusted income (MAGI). The range of phase-out for joint filers is between $160,000 and $180,000 of MAGI. These amounts are not indexed for inflation, please note.
Lifetime Learning Credit (LLC):
The maximum deduction for this credit is $2,000 per taxpayer (not per student).
The phase-out range for the year is between $55,000 to $65,000 of MAGI for people filing single and $110,000 to $130,000 for joint filers. These limits are indexed annually for inflation.
Tuition-and-fees deduction:
Before, you could claim an above-the-line deduction of $4,000 or $2,000 for tuition and related fees. (With this, there was no in-between or other deduction amounts allowed.) The $4,000 deduction was available for a MAGI up to $65,000 (for single filers), and the $2,000 deduction may have been claimed for a MAGI between $65,000 and $80,000. The $4,000 deduction for joint filers was only available to those with an MAGI up to $130,000. People filing a joint return with a MAGI between $130,000 and $160,000 were able to claim the $2,000 deduction.
It’s a good idea to talk to your CPA to see if the end of the year would be beneficial, or if waiting until 2016 is better due to having already maxed out your benefit.
