Did you know that there are tax deductions for education? In other words, you can save money on your taxes thanks to expenses that you spend on furthering your education. This is something that many people miss out on, year after year. One of the main reasons for this is that people tend to turn to tax credits before tax deductions. When they don’t find any tax credits, though, they give up and move on.
Depending on your income, you may be eligible for an income tax deduction up to $4,000 for tuition and other fees. With this tax deduction, you can deduct either $2,000 or $4,000 which is meant to offset post-high school expenses.
How much can I deduct? If your adjusted gross income is $65,000 or less ($130,000 or less if filing a joint return), you are able to deduct the full $4,000. Those with an adjusted gross income between $65,001 and $80,000 ($130,001 to $160,000 for joint returns) only qualify for a tax deduction of $2,000.
Those who earn more than the limits listed above are not eligible for this tax deduction.
If you are eligible for this tax deduction, you need to know which expenses qualify. Generally speaking, any money that you pay in tuition and enrollment fees to a post-high school institution can be deducted on your income tax return.
Of course, there are expenses that do not qualify for this tax deduction. Some of the most common include room and board, transportation, basic living expenses, books and supplies, and courses that do not apply to your degree program.
Can I take this tax deduction whenever I want? The deduction is based on: enrollment for the current tax year, enrollment for a term that begins during the year, and enrollment that starts by March of the following year.
There are many benefits of the tuition tax deduction. It is considered an “above-the-line” deduction, which means that it reduces your adjusted gross income (AGI). Along with this, the tax deduction is not subject to phase-out rules.
It is important to take advantage of as many tax deductions as possible. If you do not qualify for any education tax credits, you should consider savings that can be had in the way of deductions.
Tax deductions for education can help you pay less in taxes, while making it easier to continue your post-high school education. With many benefits, make sure you consider these tax deductions on your 2010 return.