The Bryan Times & Northwest Signal Wednesday, February 12, 2020
There are deductions for college students and parents
By RON OSBURN [email protected]
It’s tax season, and for college students and parents of college students, understanding the tax deductions available could mean big savings on a tax bill.
“It could be a savings. And if you can save money, why not,” said Cheryl Karnes, owner of Bryan-based Total Accounting Xperts, a bookkeeping, payroll and tax preparation company.
Karnes said depending on income level, college students and parents can deduct up to $4,000 of qualified college costs, including tuition and other qualified expenses. The deduction reduces the person’s taxable income level, which generally reduces taxes owed, she said.
The only caveats are that filers can’t claim a tuition-and-fees deduction and an education credit in the same year for the same student. And for college students, if you are still claimed as a dependent, you can’t claim the credit, according to the Internal Revenue Service. But even before college students and parents of college students get started, Karnes suggests the following basic tips:
- Find out your dependency status.
- Figure out which tax forms you need.
- Claim the right education tax credits.
- Take all the higher education tax deductions you qualify for.
Karnes also said college students and parents of college students need to be aware of four tax forms:
- W-2: You’ll receive this from your employer; it contains any taxes that were withheld from your pay-check.
- Form 1098-T: This is your tuition statement, which your college should provide. It will include information you’ll need to report to claim education credits – such as tuition paid, related expenses and any scholarships or grants you received.
- Form 8863: You’ll need this to see if you qualify for education credits, including the American Opportunity Credit and the Lifetime Learning Credit.
- Form 1098-E: You’ll need this to deduct any interest you paid on a qualified student loan during the tax year. If you paid more than $600 in interest, your lender should send you this form.
An Edgerton native, Karnes earned an accounting degree from Northwestern State Community College, and has close to 20 years tax preparation experience, the majority with a national tax and accounting company. She began her own company with her husband Terry about a year ago in an office on East High Street.
Karnes also listed some other tax deduction opportunities college students and parents of college students need to be aware of:
- American Opportunity Credit
This is a tax credit if you’re an undergraduate and have not completed the first four years of postsecondary education as of the beginning of the year. The maximum annual credit is $2,500 of the cost of tuition, fees and materials paid during the taxable year for each student.
- Lifetime Learning Credit
This allows you to claim a credit of up to $2,000 on qualified education expenses, but unlike the American Opportunity Credit, this is nonrefundable. You won’t get money returned to you, but it can reduce what you owe. However, there’s no limit to the number of years you can claim this credit, unlike the American Opportunity Credit, which doesn’t allow you to take the credit on the same student for more than four years.