Tax Benefits for Higher Education
There are federal government tax benefits that help make higher education affordable, including the Hope and Lifetime Learning Credit, education IRA's and student loan interest deduction. You may qualify for one or more of these tax savings.
Under the American Recovery Act (ARRA), more parents and students will qualify over the next two years for the American Opportunity Tax Credit to pay for college expenses. This provision modifies the existing education credit known as the Hope Credit, making the credit available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary educations years instead of two. Many of those eligible will qualify for the maximum annual credit of $2,500 per student. ARRA changes to this credit are temporary, for 2009 and 2010 tax years. Below is an IRS video on these provisions of ARRA.
The Internal Revenue Service offers some helpful information about tax incentives for higher education expenses on their website.
For more information about tax credits and benefits, see the Internal Revenue Service's Publication 970. You can obtain a copy of Publication 970 by calling (800) 829-3676, or view and download it at www.irs.ustreas.gov. The National Association of Student Financial Aid Administrators offers a helpful guide called NASFAA's Parent and Student Tax Benefits for Higher Education.