ENHANCED ONLINE NEWS. MARCH 7, 2013. It’s tax season. Students and families who paid college expenses or interest on student loans in 2012 may be eligible for a tax break. Sallie Mae, the nation’s no. 1 financial services company specializing in education, outlines foureducation-related tax benefits available for tax year 2012.
There are two education-related tax credits, the American Opportunity Tax Credit and the Lifetime Learning Credit, as well as two deductions, one for student loan interest and the other for tuition and fees. Certain limitations, however, are placed on a taxpayer’s ability to claim these credits and deductions together in the same year.
The American Opportunity Tax Credit is a per-student, partially refundable tax credit. It was set to expire at the end of 2012, but it was extended through 2017. For tax year 2012, students can claim up to $2,500 for expenses on tuition, fees and educational materials in the first four years of post-secondary education. To receive the maximum credit amount, a taxpayer must have modified adjusted gross income of less than $80,000, or $160,000 for joint filers. Again this year, low-income families who owe no tax may be eligible to receive a credit refund of up to $1,000 for each qualifying student.
The Lifetime Learning Credit is a per-taxpayer, non-refundable credit of up to $2,000 that applies only to expenses for tuition and fees. Students in undergraduate or graduate programs or any continuing education program may be eligible. The credit may be claimed for any year in which qualified tuition and fees are paid. To receive the maximum credit amount, a taxpayer must have modified adjusted gross income in 2012 of less than $52,000 and $104,000 for joint filers.
The Student Loan Interest Deduction is an “above-the-line” deduction of up to $2,500 for interest paid on qualified federal or private higher education loans. To receive the maximum deduction, joint filers must have modified adjusted gross income of less than $125,000 and $60,000 for single taxpayers.
Refer to the IRS Form 1098-E to determine the amount of student loan interest paid on one or more qualified higher education loans during the year. Sallie Mae customers may log in to SallieMae.com to securely download their Form 1098-E from their online account.
The Tuition and Fees Deduction is an “above-the-line” deduction of up to $4,000 for qualified tuition expenses and related fees paid in 2012. In order to receive the maximum deduction, a taxpayer must have modified adjusted gross income of less than $65,000 or $130,000 for joint filers. Taxpayers may refer to the IRS Form 1098-T provided by their school to help them determine the amount of qualified tuition and related fees they paid during the year.
Taxpayers may also take advantage of higher education tax benefits through a 529 college savings plan. 529 plans are tax-advantaged state savings programs in which the earnings on plan contributions are allowed to grow tax-free and plan distributions are not taxed to the extent they are used to pay qualified higher education expenses. Many states offer eligible taxpayers either a deduction or a credit for contributions made to a 529 plan.
Taxpayers can even save money for college as they file. Upromise by Sallie Mae members may earn cash back for college when they use H&R Block or TurboTax to file taxes.
Sallie Mae reminds taxpayers to be aware of tax refund scams. Examples include Internet solicitations asking for Social Security numbers, fake flyers claiming refunds are given without eligibility, and claims for refunds or rebates based on fake statements. The IRS offers tips to help you avoid becoming a victim of these scams.
To learn more about the education tax credits and deductions described above visit www.SallieMae.com/taxcenter. Please consult IRS Publication 970, Tax Benefits for Education, or your personal tax adviser to learn which education-related tax benefits you are eligible to receive for 2012.