St. Michael Families Can Save on Tuition at Tax Time

Parents who have purchased all of those expensive school supplies, or are saving nickels and dimes for that private school or college tuition, should know they could save a small bundle at tax time.

Especially if you had to purchase one of those expensive scientific calculators.

That’s advice from Linda Borchardt, an associate

“A lot of these new benefits have come along in the past several years,” Borchardt said, as the student population at places like St. Michael-Albertville Public Schools and School have exploded. “There are some really nice deductions. People just need to reach out to their tax preparation person for the right information.”

All-day kindergarten, for example, has deductions tied to it. As do any loans for college or other post-secondary learning centers.

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

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.

It’s a good idea to hang on to all education-related receipts, Borchardt said. Even the one for that box of crayons you forgot.

“If it’s a required school supply, it’s probably a deduction,” she said.

Remember to have those papers on hand when you come in to prepare your taxes early next year.

“It’s amazing what we can catch that you maybe wouldn’t think of if you’re self-preparing a return. Our software is much more complex, so it’s going to flag those deductions,” Borchardt said. “We’ve amended returns for many people, and we can use a combination of exemptions to max your credits, getting the best possible return.”

That’s great in a time where “everyone is watching their nickels” she said.