CHICAGO (Reuters) – If you are going to college, getting extra training for a job, or paying off student loans, there are myriad tax breaks worth thousands of dollars to people burdened by college costs.
Although many were threatened in early versions of the tax bills crafted by the Senate and House and Representatives, students can breathe a sigh of relief that the benefits all remain. Tax experts suggest using these strategies before the end of December to get every penny possible:
* Student loan interest deduction
About 12.4 million borrowers make use of this deduction. You can deduct up to $2,500 in interest per year, which can result in tax savings that for some top $600.
The deduction depends on how much you have paid in a single tax year toward your student loans and also depends on your income.
If your loan payments made so far for 2017 do not qualify for the $2,500 maximum deduction and you are still paying off student loans, consider paying more before the end of the year to boost the deduction, said Mark Kantrowitz, publisher of www.Cappex.com. You can find out how much interest you have paid so far this year from the student loan servicer that collects your monthly payments.
To take the full $2,500 deduction, an individual cannot have a modified adjusted gross income over $65,000, and for couples $135,000. For individuals with incomes up to $80,000 and for married couples earning up to $165,000, smaller deductions apply.
Paying extra by Dec. 31 would be particularly wise if your income next year is likely to put you over the income cutoff, said Gil Charney, director of tax and policy analysis for The Tax Institute at H&R Block.
* College credits
Both the American Opportunity Credit and Lifetime Learning Credit provide tax breaks to help pay for education, but apply to different stages.
For undergrads, the American Opportunity Credit is worth up to $2,500 per year, but can be used only for the first four years of college. Students must attend at least half-time.
If you have not paid enough tuition and fees to qualify for the full credit this year and have been billed for the first quarter or semester in 2018, consider paying the bill now to maximize the 2017 credit, Charney said. The credit covers 100 percent of the first $2,000 in tuition and fees paid in a year; then 25 percent of the next $2,000.
Remember, there are income limits. You can’t get the full credit with modified adjusted gross income over $80,000; $160,000 for couples.
If your income will exceed the limit in 2018 but qualifies in 2017, this would be the year to capture as much as possible.
The same strategy applies to the Lifetime Learning Credit, which is valuable to part-time students, graduate students or workers trying to enhance job opportunities with an extra course or training.
The Lifetime Learning Credit is worth $2,000, or 20 percent of the first $10,000 spent in a year. So consider paying ahead for 2018 education, especially if you are near an income cutoff: over $56,000 in modified adjusted gross income for individuals, or $112,000 for couples for the maximum credit.
Keep in mind that if two spouses are going to school they cannot both claim the $2,000; it is a maximum per household. The American Opportunity Credit is kinder because it applies per student. Parents with three children in college at the same time could claim the credit for each child and do it annually for the four years a child is in an undergraduate program.
For more details, see IRS Publication 970
The opinions expressed here are those of the author, a columnist for Reuters.
Editing by Beth Pinsker and Leslie Adler