Sep 01, 2017
By Paula Rogers, CPA President and Partner at Terry Lockridge & Dunn
It is hard enough to watch your child leave for college. I know. My youngest started at UNI in August. Unfortunately, Congress decided not to extend the $4,000 tuition and fees tax deduction for 2017, leaving many parents worried that college will now be more expensive.
But it is not as bad as it sounds. That is because Congress left in place two popular education credits that may offer a more valuable tax break:
- The AOTC. The American Opportunity Tax Credit (AOTC) is a credit of up to $2,500 per student per year for qualified undergraduate tuition, fees and course materials. The deduction phases out at higher income levels, and is eliminated altogether for married couples with a modified adjusted gross income of $180,000 ($90,000 for singles).
- Lifetime Learning Credit. The Lifetime Learning Credit provides an annual credit of 20 percent on the first $10,000 of tuition and fees, for either undergraduate or graduate level classes. There is no lifetime limit on the credit, but only couples making less than $132,000 per year (or singles making $66,000) qualify. Unlike the AOTC, this deduction is per tax return, not per student.
Who is most affected by the loss of the tuition and fees deduction? If you are paying for your student's graduate-level courses and are making too much to qualify for the Lifetime Learning Credit, the tuition and fees deduction is generally the only means you have to reduce your tax bill.But there is still hope! In addition to the two alternative education credits, there are many other tax benefits that help reduce the cost of education. There are breaks for employer-provided tuition assistance, deductions for student loan interest, tax-beneficial college savings options, and many other tax-planning alternatives. Please contact Paula Rogers at firstname.lastname@example.org if you would like an overview of the alternatives available to you.