IRS Publication 970 Offers Tax Relief to Students

United States' IRS Publication 970, or "Tax Benefits for Education," is helpful to college students putting themselves through college or to their parents or immediate family members who may be "footing the bill." IRS forms and publications and other useful tax-related information is now available at the Internal Revenue Service website at www.irs.gov. Tax deductions, or the act of taking your tax refund for student loans, are also explained on the site.

Different Tax Deductions Available to Students

Most students and their families are unaware of the range of tax deductions and benefits available to them.

• Reduction on educational grants, scholarships, fellowships, and tuitionGrants, scholarships, fellowships, and tuition are all taxable under U.S. law, but many such expenses are also tax-free when they meet the tax code requirements as explained in the appropriate IRS tax publication. Generally, scholarships and fellowships are considered tax free if the student is a candidate for a degree and if the money is used to pay eligible educational expenses.
• Hope CreditHope Credit provides for as much as $1,500 worth of tax relief per student. That amount can be deducted from the taxpayer's income tax return. Hope Credit is only applicable if the taxpayer's modified adjusted gross income or MAGI is $53,000 or more or at least $107,000 for a joint return.
• Lifetime Learning Credit. Lifetime learning credit is another type of tax relief given to benefactors of college students. This works in conjunction with the Hope Credit but the two cannot be claimed during the same year. Lifetime learning credit is worth a maximum of $2,000 for all students. The filer's MAGI should be between $43,000 and $53,000 for an individual or $87,000 to $107,000 for a joint return. Those with MAGI above $53,000 and $107,000 for single and joint returns respectively are not eligible to file a Lifetime Learning Credit for their sponsored students.
• Student Loan Interest DeductionThis relief can reduce taxes by as much as $2,500. The major requirement is that the student should have applied for and been granted a loan to finance his or her schooling. In order to qualify, the filer's MAGI should be less than $65,000.
• Student Loan Cancellations and Repayment Assistance. These two types of student loans are virtually tax-free, provided that certain requirements are fulfilled. To learn more, download the IRS form and publication online, which details the individual requirements that must be met to make these two loans deductible from your taxable income.

In addition to tax relief for loan-related income and fees, the tax code also addresses tuition and school fees.

Continue to : Tuition and Fees Deduction

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