Washington, DC (PRWEB) March 26, 2014
Filed your taxes yet? With less than three weeks until the April 15 deadline, many students and families are looking for ways to increase their federal refund or reduce the amount they owe.
The National Association of Student Financial Aid Administrators (NASFAA) has released a new, free Tax Benefits Guide for Tax Year 2013 designed to help students and families navigate the sometimes thorny task of determining which higher education tax benefits you qualify to receive—and which will secure you the maximum federal return.
The federal government provided $20 billion in tax savings to students and families in 2011 (Source: College Board, 2013). These incentives come in a couple of forms:
-- Tax Credits directly reduce the amount of tax for which students or parents are liable; and
-- Tuition Tax Deductions reduce the amount of income on which they pay taxes.
On average, education tax benefit recipients saved over $1,400 in 2011 (Source: College Board 2013).
“There are a number of federal tax incentives that can help lower the cost of higher education, even for families who wouldn’t normally file a tax return because of their income level,” said NASFAA President Justin Draeger. “It’s the job of financial aid administrators to help students and families plan and pay for college. They are a great resource for questions about the eligibility requirements for various educational credits when filling out your tax return.”
If a student attended college in 2013, he or she may qualify for more than one of these incentives, but there are some restrictions. It's a good idea to calculate taxes in multiple ways to find the maximum benefit.
-- The American Opportunity Tax Credit offsets what families pay for the first four years of higher education by reducing the amount of income tax. In addition, the credit is partially refundable so families may be able to get a check from the IRS even if they don’t owe any income tax! This credit provides up to $2,500 per student and up to $1,000 of the credit can be refunded if the credit is more than the family owes in taxes.
-- The Lifetime Learning Credit is available for all types of postsecondary education, and may be particularly helpful to graduate students. Generally, families should only use this credit once they have exhausted their eligibility for more generous credits. This credit provides up to $2,000 per tax return (not per student).
-- The Tuition and Fees Deduction can reduce a family's taxable income by as much as $4,000 and may help if they are not eligible for any of the tax credits. It is an adjustment to income, so families can claim this deduction even if they do not itemize deductions on Schedule A of Form 1040.
-- The Student Loan Interest Deduction allows families to deduct interest paid on student loans for parents, spouses, or dependents. It can reduce taxable income by as much as $2,500, depending on the amount of interest paid and income.
Additional detail on eligibility requirements is included in NASFAA’s Tax Benefits Guide for students and families. To speak to a NASFAA spokesperson on this topic, please email news(at)nasfaa(dot)org or call (202) 785-6944.
The National Association of Student Financial Aid Administrators (NASFAA) is a nonprofit membership organization that represents nearly 20,000 financial aid professionals at more than 3,000 colleges, universities, and career schools across the country. NASFAA member institutions serve nine out of every ten undergraduates in the U.S. Based in Washington, D.C., NASFAA is the only national association with a primary focus on student aid legislation, regulatory analysis, and training for financial aid administrators. For more information, visit http://www.nasfaa.org.