TIP SHEET #39 THE FINANCIAL CLINIC

TAX CREDITS AND DEDUCTIONS MAKE COLLEGE MORE AFFORDABLE

HOPE CREDIT (AKA AMERICAN OPPORTUNITY TAX CREDIT)—A parent can claim a maximum annual credit of $2,500 per student. The credit can be applied to college tuition, mandatory fees and course-related books and supplies.

four years of postsecondary education. The credit is available only for four tax years of per eligible student.

Students may claim the credit only if they are not claimed as a dependent on another person’s tax return.

Income Eligibility: The credit is phased out for incomes between $80,000 and $90,000 (between $160,000 and $180,000

LIFETIME LEARNING CREDIT—A parent may claim a maximum annual credit of $2,000 per student. The credit can be applied to combined tuition and mandatory fees for yourself, spouse and dependent children. This equates to a $2,000 tax credit.

There is no requirement that the student be studying towards a degree or be enrolled at least half-time and there is no limit on the number of years the credit may be taken.

Income Eligibility: The credit is phased out for incomes between $50,000 and $60,000 (between $100,000 and $120,000

NOTE: Claiming the Hope/American Opportunity credit described above means that you may NOT claim a Lifetime Learning credit for any of that student’s expenses in the same tax year.

TUITION AND FEES—An above-the-line deduction (this means you do not have to itemize your deductions) of up to a maximum of $4,000 is available for college tuition and related expenses for yourself, your spouse, or your dependent.

Income Eligibility: –

is $4,000.

– jointly), the deduction limit is $2,000.

NOTE: The deduction is NOT available if a Hope or Lifetime Learning credit is claimed for that student’s expenses for the same tax year.

DEDUCTION FOR STUDENT-LOAN INTEREST—An above-the-line deduction of up to maximum of $2,500 in student loan interest may be deducted if debt incurred to pay college costs for yourself, your spouse, or your dependent, while enrolled as a student at least half-time in a degree program.

Income Eligibility: The deduction is phased out for incomes between $60,000 and $75,000 (between $120,000 and

A student claimed as a dependent may not take the deduction on his or her own return.

TAX-FREE SCHOLARSHIPS—Most scholarships and grants are tax-free if the recipient does not have to provide services in exchange for the award.

TAX-FREE EDUCATIONAL ASSISTANCE—Employers may pay and deduct up to $5,250 in college and graduate school costs for each employee under a Section 127 educational assistance plan. The education does not have to be

an employee’s children or other family members.

115 West 30th Street Suite 702 New York, New York 10001 646.810.4050 © Copyright 2011 The Financial Clinic, all rights reserved.

GOAL ASSETS BANKING CREDIT DEBT TAXESCLINIC COACH CUSTOMER