Back to School News – for the 2011 Tax Returns:

Tips from the IRS for returning students:

Whether you’re a recent graduate going to college for the first time or a
returning student, it will soon be time to get to campus – and payment deadlines
for tuition and other fees are not far behind. The Internal Revenue Service
reminds students or parents paying such expenses to keep receipts and to be
aware of some tax benefits that can help offset college costs.

Typically, these benefits apply to you, your spouse or a dependent for whom
you claim an exemption on your tax return.

  1. American Opportunity Credit  This credit, originally
    created under the American Recovery and Reinvestment Act, has been extended for
    an additional two years – 2011 and 2012. The credit can be up to $2,500 per
    eligible student and is available for the first four years of post secondary
    education. Forty percent of this credit is refundable, which means that you may
    be able to receive up to $1,000, even if you owe no taxes. Qualified expenses
    include tuition and fees, course related books, supplies and equipment. The full
    credit is generally available to eligible taxpayers whose modified adjusted
    gross income is below $80,000 ($160,000 for married couples filing a joint
    return).
  2. Lifetime Learning Credit  In 2011, you may be able to claim
    a Lifetime Learning Credit of up to $2,000 for qualified education expenses paid
    for a student enrolled in eligible educational institutions. There is no limit
    on the number of years you can claim the Lifetime Learning Credit for an
    eligible student, but to claim the credit, your modified adjusted gross income
    must be below $60,000 ($120,000 if married filing jointly).
  3. Tuition and Fees Deduction  This deduction can reduce the
    amount of your income subject to tax by up to $4,000 for 2011 even if you do not
    itemize your deductions. Generally, you can claim the tuition and fees deduction
    for qualified higher education expenses for an eligible student if your modified
    adjusted gross income is below $80,000 ($160,000 if married filing
    jointly).
  4. Student loan interest deduction  Generally, personal
    interest you pay, other than certain mortgage interest, is not deductible.
    However, if your modified adjusted gross income is less than $75,000 ($150,000
    if filing a joint return), you may be able to deduct interest paid on a student
    loan used for higher education during the year. It can reduce the amount of your
    income subject to tax by up to $2,500, even if you don’t itemize deductions.

For each student, you can choose to claim only one of the credits in a single
tax year. However, if you pay college expenses for two or more students in the
same year, you can choose to take credits on a per-student, per-year basis. You
can claim the American Opportunity Credit for your sophomore daughter and the
Lifetime Learning Credit for your senior son.

You cannot claim the tuition and fees deduction for the same student in the
same year that you claim the American Opportunity Credit or the Lifetime
Learning Credit. You must choose to either take the credit or the deduction and
should consider which is more beneficial for you