Heading to college is frightening and exciting in equal measure. One of the most time-consuming elements of it in the United States is figuring out your finances.
What you’re eligible to receive, what you’ll need to pay for yourself, whether you’ll need to get a job, and how much you can really enjoy yourself.
Something that many people forget to look into, though, is tax credits and deductions that can save a lot of money. Students and parents can take advantage of tax breaks than can result in thousands of dollars of savings when it comes to tuition fees, books, fees and supplies.
There are two best examples of tax credits that should be looked into by anyone heading to college.
American Opportunity Tax Credit
This particular scheme allows you to lower your income tax bill by up to 2500 dollars per student. That deduction is per year on undergraduate tuition, books and fees. The only area it will not help with is accommodation costs.
The American Opportunity Tax Credit can only be claimed for the first four years of higher education and can be claimed by filling out the IRS Form 8863 with a tax return.
It is for undergrad students who have filed a tax return or parents who pay the college costs of children listed as dependants on their tax return. Their modified adjusted gross income (MAGI) must be below 80,000 dollars if they are filing their tax return as single or as head of household or less than 160,000 dollard if they are filing jointly.
Similar to the above, the Lifetime Learning Credit lets you claim 20% of the first 10,000 dollars paid for tuition and fees in the previous year. This one is not just for undergrad students, it is for graduate and vocational students too.
Other schemes include the Student Loan Interest Deduction and the 529 savings plan.
