Back-to-School Tips for Students and Parents Paying College Expenses

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Federal, State, Local and InternationalTaxes – Whether you’re a recent high school graduategoing to college for the first time or a returning student, it will soon betime to head to campus, and payment deadlines for tuition and other fees arenot far behind.
The IRSoffers some tips about education tax benefits that can help offset some collegecosts for students and parents. Typically, these benefits apply to you, yourspouse or a dependent for whom you claim an exemption on your tax return.

• American Opportunity Credit. This credit, originally created underthe American Recovery and Reinvestment Act, is still available for 2012. Thecredit can be up to $2,500 per eligible student and is available for the firstfour years of post secondary education at an eligible institution. Fortypercent of this credit is refundable, which means that you may be able toreceive up to $1,000, even if you don't owe any taxes. Qualified expensesinclude tuition and fees, course related books, supplies and equipment.
• Lifetime Learning Credit. In 2012, you may be able to claim aLifetime Learning Credit of up to $2,000 for qualified education expenses paidfor a student enrolled in eligible educational institutions. There is no limiton the number of years you can claim the Lifetime Learning Credit for aneligible student.

You can claimonly one type of education credit per student in the same tax year. However, ifyou pay college expenses for more than one student in the same year, you canchoose to take credits on a per-student, per-year basis. For example, you canclaim the American Opportunity Credit for one student and the Lifetime LearningCredit for the other student.

• Student loan interest deduction. Generally, personal interest you pay,other than certain mortgage interest, is not deductible. However, you may beable to deduct interest paid on a qualified student loan during the year. Itcan reduce the amount of your income subject to tax by up to $2,500, even ifyou don’t itemize deductions.

These education benefitsare subject to income limitations, and may be reduced or eliminated dependingon your income. For more information contact us today for no obligation freeconsultation. ABA Tax AccountingAmare Berhie, Senior TaxAccountantamare@abataxaccounting.com612-282-3200866-936-0430 Toll freehttp://www.abataxaccounting.comwww.abatax81.blogspot.comwww.abataxaccounting.wordpress.com