MARCH 2010 - Education Credits
Jay Sanders, CPA
Due to recent economic conditions, unemployment has become a significant topic in the news. Companies all over the country are being forced to downsize and reduce employee levels. Many individuals who have lost their jobs have decided to return to school to increase their chances of finding new employment or perhaps to pursue a new career. The federal tax code offers several education deductions and credits that help offset these educational costs. The first is the Qualified Higher Education Deduction. You may deduct up to $4,000 for tuition and fees for yourself, your spouse, or your children. This deduction is scheduled to end after 2009; however, Congress has extended this credit in the past. Another deduction relates to student loan interest. You may deduct up to $2,500 annually of qualified student loan interest. The tax code provides a Lifetime Learning Credit of up to $2,000 of higher education fees. This credit can be used for undergraduate fees as well as graduate and professional degrees. Each of these deductions and credits phase out for various income levels; therefore, they may be limited or not allowed for individuals at higher income levels.