Support For Education Tax Credits
Higher education is a necessity to most of us, but a difficult
expense to swallow. In today's economy it is more important than
ever to keep your budget in check. But when it comes time to prepare
your taxes, there's no need to study up on savings. Student tax
filing is easier than ever with TurboTax student tax preparation
You can prepare your own tax return and get them done right, for less! Turbo Tax can help you qualify to get $ big bucks back in available student education credits and deductions.
If your finances are like most students, chances are you could use some financial help to subsidize your endless college education expenses.
Fortunately in the United States, the federal government provides various types of financial assistance for students that file a (FAFSA), Free Application for Federal Student Aid.
Each financial award that you receive from the federal government has separate and unique tax consequences. Therefore, each one is reported and treated differently when preparing your federal tax return. This is where TurboTax can help you shine!
TurboTax Helps Students Apply Tax Credits
The U.S. federal government offers students two tax credits that you can use to reduce your taxable income on a dollar-for-dollar basis. This can be applied to your school-related education expenses to ease the financial burden.
Enrolling in school these days is getting more and more expensive for the average taxpayer which in turn creates much higher debt loads. Although you may not claim a credit just for taking out a student loan, paying school expenses even if it is with borrowed money, may allow you to qualify for claiming one of the education credits.
American Opportunity Credit
The American Opportunity Credit is available to students who are in their first four years of school or paying for their own education, and are pursuing a course of study that will eventually lead to a degree. These students could be eligible to claim the American Opportunity Credit to cover the cost of tuition payments they make along with the cost of purchasing school books and supplies needed, as long as they are enrolled and maintain at least half-time status.
With the price of tuition on the rise, it is not very difficult to qualify for the maximum credit allowed. The real difficulty may be coming up with the money to pay for those expenses up front to begin with. When students use student loan funds to finance their education, the IRS allows them to include the education expenses paid for with those funds to be included in the credit. TurboTax tax software helps students apply this credit.
Lifetime Learning Credit
The Lifetime Learning Credit is available for Students who just take an extended education course here and there to improve work skills, as well as those who have already finished their first four years of post-secondary study. While the credit will cover tuition and fees, students may not include the cost of books and supplies unless direct payment for them is required by the school.
Older students often take advantage of student loans to help pay for their tuition. Just like the American Opportunity Credit, the IRS allows them to claim the Lifetime Learning Credit even if they used a student loan to pay for 100 percent of their tuition.
Since this credit is equal to 20 percent of the tuition and fees paid, if a student borrows $2,000 to pay tuition for their course, the credit will equal $400. They can then treat this as a discount on their student loan if they use the $400 to pay down some of the student loan debt they have accumulated.
IRS Form 8863 Education Credits
For each tax year that a student claims either education tax credit, the IRS requires them to prepare a Form 8863 and file it with their personal income tax return. They can use this form to report eligible school expenses as well as to calculate the allowed credit. Generally, most schools will notify students of their eligible costs for the year prior to the deadline for preparing their income tax return.
TurboTax Fills Out The Proper Forms
If your using TurboTax to prepare and file your tax return, the TurboTax Tax Software will make sure all the right forms are prepared through the tax preparation process. All you need to do is just answer a few simple questions about your education expenses.
Student loan tax benefits donít end with just these tax credits. A deduction is available as well for the interest payments you make as you start repaying your loan. Each year you can deduct the amount of interest you paid on student loans that were used to pay for school-related expenses, including your room and board.
If you used some of the funds for other non education personal expenses, like a car or vacation, you will need to reduce the student loan interest deduction accordingly.