The tax code provides a variety of tax incentives for families who are saving for, or already paying, higher education costs or are repaying student loans.
You may be able to claim a credit for the qualified tuition and related expenses of the students in your family who are enrolled in eligible educational institutions. The types of credits available are the Lifetime Learning Credit and the American Opportunity Tax Credit.
Different rules apply to each credit. If you claim an American Opportunity Credit for a particular student, none of that student’s expenses for that year may be applied toward the Lifetime Learning Credit.
You may be able to claim a tuition deduction of up to $4,000 of qualified education expenses paid during the year for yourself, your spouse, or your dependent. You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. The qualified expenses must be for higher education.
You may be able to deduct interest you pay on a qualified student loan. And, if your student loan is canceled, you may not have to include any amount in income. The deduction is claimed as an adjustment to income so you do not need to itemize your deductions on Schedule A Form 1040.
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