Even if you normally wouldn’t file a tax return because of your income level, be sure to file to avoid missing out on education tax benefits that could put money in your pocket.
Washington, DC (PRWEB) April 01, 2013
Looking forward to a big tax return this year? Or seeking ways to reduce the amount you'll shell out to Uncle Sam?
The National Association of Student Financial Aid Administrators (NASFAA) has released a new, free Tax Benefits Guide for Tax Year 2012 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 them the maximum return on April 15.
The federal government provides roughly $19 billion in tax savings every year. These incentives come in a couple of forms:
-- Tax Credits directly reduce the amount of tax for which taxpayers are liable; and
-- Tax Deductions reduce the amount of income on which they pay taxes.
On average, tax credit recipients save over $1,500 annually and tuition deduction recipients save about $400 annually (Source: College Board 2012).
“Even if you normally wouldn’t file a tax return because of your income level, be sure to file to avoid missing out on education tax benefits that could put money in your pocket,” said NASFAA President Justin Draeger. “If you have questions about what qualifies, talk to someone in your school’s financial aid office. Financial aid administrators partner with students and families every day to help them plan and pay for their higher education.”
Students who attended college in 2012 may qualify for more than one of these incentives, but there are some restrictions. It's a good idea to calculate your taxes multiple ways to find the maximum benefits available.
-- The American Opportunity Tax Credit offsets what students pay for the first four years of higher education by reducing the amount of income tax paid. In addition, the credit is partially refundable so filers 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 filer owe in taxes.
-- The Lifetime Learning Credit is available for all types of postsecondary education, and may be particularly helpful to graduate students. Generally, filers 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 taxable income by as much as $4,000 and may help if filers are not eligible for any of the tax credits.
-- The Student Loan Interest Deduction allows filers to deduct interest paid on student loans for yourself, your spouse, or your dependents. It can reduce the filer's taxable income by as much as $2,500, depending on the amount of interest paid and the filer's income.
Additional detail on eligibility requirements is included in NASFAA’s Tax Benefits Guide for students and families.
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. Each year, our members help nearly 15 million students receive funding for postsecondary education. 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.