Education Tax Deductions and Credits

Presented by Marc Aarons

With many students heading off to college this month, I wanted to take this opportunity to share an overview of key education tax credits and deductions. Feel free to share this email with anyone you think may benefit from this information, and do not hesitate to reach out with any questions. 

 American Opportunity Tax Credit (AOTC)

 With the AOTC, you can claim a credit of up to $2,500 per student per year.  The best part? Up to $1,000 of the AOTC is refundable.  You can only take the AOTC during the first four years of school.

 Tuition, books, and fees count toward the credit. Room, board, or amounts reimbursed by a scholarship don’t qualify. 

 Lifetime Learning Credit (LLC): 

 You can claim a credit of up to $2,000 under the LLC. Unlike the AOTC, the LLC is entirely non-refundable. However, you can use the LLC for more than four years, giving you more flexibility to pursue your education. 

 Student Loan Interest Deduction: 

 You may be able to deduct up to $2,500 of the interest paid on a student loan during the tax year. To qualify for the deduction, you must be legally obligated to pay the interest. So, if you took out a student loan for your child, you must be a signer or co-signer to deduct the interest you’ve paid. 

 With that overview noted, education credits and deductions can be tricky. For example, your income and filing status may affect your ability to claim education credits and deductions on your tax return.  

 If you’d like to chat further about education credits and deductions, feel free to reach out. Or, if you have other tax-related needs, I encourage you to respond to this email or give our office a call. 

Marc Aarons may be reached at 714-887-8000 or Email Marc

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This communication is from Money Managers, Inc.; a Securities and Exchange Commission registered investment advisor.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results.  Investments involve risk and are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.