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Teachers, students benefit from tax breaks

POSTED: February 27, 2009 10:02 a.m.
When it comes to higher education, students and their families may take advantage of credits to offset expenses like tuition and fees.
According to Liberty Tax Service, the deduction for college tuition and fees is available for filing a 2008 return. This can provide a deduction of up to $4,000 whether it’s taken for the taxpayer, spouse or dependents.
Taxpayers should calculate to see whether the college tuition and fees deduction or the Hope or Lifelong learning credit is the most advantageous since only one may be claimed.
In addition, eligible educators who spend their own money on classroom supplies may qualify for a tax break when filing a 2008 return. An eligible educator is a kindergarten-12th grade teacher, instructor, counselor, principal or aide who works at least 900 hours in either a public or private school. The adjustment for these expenses, of no more than $250, can be claimed whether or not the taxpayer can itemize.

STUDENT LOAN INTEREST

Taxpayers repaying a student loan (or education loan) may qualify to deduct up to $2,500 of their student loan interest as an adjustment to income. There are AGI limitations which determine deductibility. The credit may be phased out if your modified adjust gross income exceeds certain limits. For 2008, the phase-out levels are between $55,000 and $70,000 for single, head of household, and qualifying widow taxpayers, and between $115,000 and $145,000 for married filing jointly.

TUITION AND FEES DEDUCTION

Qualifying higher education expenses such as tuition and fees you paid for yourself, a spouse, or a dependent may be deductible. Up to $4,000 of these expenses can be deductible as an adjustment to income if your adjusted gross income is below $65,000 ($130,000 if married filing jointly). The deduction is limited to $2,000 if your AGI exceeds that limit but is under $80,000 ($160,000 if MFJ). The taxpayer cannot claim both this deduction and the Hope or lifetime learning credit for the same student in the same year.

HOPE AND LIFETIME LEARNING CREDITS


There are two nonrefundable tax credits for payments made for qualified tuition and related expenses for post-secondary education. The Hope credit remains at 100% of the first $1,200 of expenses and 50% of the next $1,200 expenses, for a maximum credit of $1,800. The lifetime learning credit gives a credit of 20% of qualified educational expenses not exceeding $10,000, for a maximum credit of $2,000. There are phase-out modified adjusted gross income levels for both credits.

QUALIFYING EXPENSES FOR EDUCATIONAL CREDITS


Which educational expenses qualify for the education credits? Tuition you paid for yourself, your spouse or a dependent to attend an eligible educational institution in 2008 should qualify. The costs of books, supplies and equipment do not usually qualify but may qualify if these purchases are required by and paid to the school in order to attend. The amount of credit for the Hope and/or Lifetime learning credits will be reduced for single taxpayers whose modified adjusted gross income is between $48,000 to $58,000 (between $96,000 and $116,000 for married filing jointly).
 

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