Feb 23, 2017 07:16 AM EST
Earning a college degree can really be very expensive, and a significant percentage of college students graduate with the burden of student loan debt. Thankfully, there are lucrative tax benefits that can be very helpful to both current college students and to the parents who are trying to foot those bills. The challenge comes in when it comes to claiming these tax refunds and deductions and the processes can sometime become frustrating.
Here are some of the things you need to know about tax credits to see if you can qualify for a break on your college expenses.
American Opportunity Tax Credit
According to Forbes, the American Opportunity Tax Credit (AOTC) can give eligible students an amount of $2,500 annual credit for valid education expenses just like the tuition. Another good thing about this is that if your tax liability is low and have not owed IRS, you can get up to 40 percent of the credit refunded to you in the form of cash.
Lifetime Learning Credit
The Lifetime Learning Credit (LLC) is also intended for qualified education expenses and is worth up to $2,000. The only difference between LLC and AOTC is that the credit is not refundable, so you cannot get your money back even if you can bring your tax liability down to zero.
Student Loan Interest
According to Market Watch, if you qualify, you can take advantage of this tax break and be able to write off up to $2,500 of your annual college loan interest charges.
Tuition and Fees Deduction
The tuition and fees deduction can let you deduct up to $4,000 on your tax return so that your taxable income can be reduced. The catch is that it is not a refundable credit which means that you do not get to have your money back if your tax liability is zero.
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