The Internal Revenue Service currently offers several tax breaks for college students and their parents to take advantage of before the April 15 deadline.
Students and their parents can claim tax deductible school-related items when filing state and federal taxes. Payments for tuition and student loan interest, and some living expenses may be deductible depending on the adjusted gross income of the taxpayer.
“I don’t do my taxes,” said Danya Banjoko, a part-time employee for Victoria’s Secret and an undeclared SF State student. “My mom does them and she just gives me the refund. I think the most I’ve gotten back was like $600.”
The two most common types of tax credits that can make it easier on taxpaying students or their parents are the non-refundable Hope Credit and the Lifetime Learning Tax Credit. Another tax break offered to working students is the Tuition and Fees Deduction. Taxpayers can only use one of the credits or deductions. There are also some limitations on how many years the tax breaks can be used.
The Lifetime Learning Tax Credit and the Hope Credit, which were introduced in 1997, are two of the most popular tax breaks.
The Lifetime Learning Credit covers tuition and course-related expenses. The credit allows a taxpayer whose adjusted gross income is $52,000 or lower, or below $105,000 for joint filers, to receive a credit of up to $2,000 a year.
The college-age student does not have to be a full-time student, and can be working toward a degree or taking classes for enrichment related to their employment. Unlike most federal financial aid, students with felony or drug convictions are still eligible for the credit.
“My biggest worry for college students is (for them) to know if they’re parents claimed them," said Robin Swarn, CEO of a Berkeley franchise of Jackson Hewitt Tax Services. "If parents claimed them and the student files on they’re own, they’ll have to amend their taxes. It can be a costly mistake.”
Students eligible for the Hope Credit are entitled to a maximum credit of $1,500 per year, for the first two years of college. Half- or full-time students must be working toward a degree or credential, and the credit covers expenses for eligible courses only. The student is ineligible if they have a drug or felony conviction.
“Parents forget student loans are deductible and that student loans early on can be deducted, not just the interest after they graduate,” said Swarn.
The Tuition and Fees Deduction grants a taxpayer the ability to cut up to $4,000 from their adjusted gross income. The deduction expires in 2005 and cannot be used in conjunction with other education tax credits.
“I’ve heard of the tax credits,” said Antonia Carr, a Macy’s employee and black studies major. “The person that does my taxes asked me to give them a list of all my expenses like my books and bridge toll (costs) because I live in the East Bay.”
For additional information on tax breaks for college students go to http://irs.gov.