Tax Benefits for Students: How to Max Out Your Tax Return

iStudent Blog

Published: April 9, 2018

Know what credits and deductions are available to students so you don’t leave money on the table.

tax_time_1.jpgThe deadline to file your 2017 federal tax return is fast approaching. If you haven’t submitted yours yet, gather your W2s and 1098Ts and get to a tax office or a computer pronto! But first, read this blog post to find out how being a graduate student can impact your taxes. Making sure you’re informed about special student deductions and credits will help you maximize your refund and ultimately offset the cost of college.

As a reminder, I’m an iSchool student writing about topics I think are useful to my fellow students, not a qualified financial professional. The information provided here was found by consulting the Federal Student Aid website. I encourage you to seek the expertise of a licensed tax advisor for your individual situation.

Lifetime Learning Credit
Chances are you (or your parents) claimed the American opportunity credit for the first four years of higher education. As a graduate student, you’ll need to opt for the lifetime learning credit instead. The good news is if you take the full seven years to complete your degree, you can claim the lifetime learning credit for all seven years! Here’s what you need to know:

What is it?

  • A tax credit up to $2,000 for education expenses available for an unlimited number of tax years.

Are you eligible?

  • You paid qualified education expenses which include tuition and fees required for enrollment or attendance.
  • Your modified adjusted gross income (MAGI) is under $132,000 a year if you are married filing jointly or $66,00 a year if you are single.

istudent_pay200v2.jpgStudent Loan Interest Deduction
13.6 billion dollars of student loan interest was deducted in 2015 according to IRS statistics, with tax savings of just under two billion dollars. If you’re making payments while you’re still in school, even if it’s just interest, you may be eligible for a tax deduction of up to $2,500. You’ll be pleased to know this deduction also applies once you are out of school and making regular payments as well.

What is it?

  • A deduction up to $2,500 based on the amount of student loan interest paid in 2017.

Are you eligible?

  • You paid interest on a student loan.
  • You are legally obligated to pay that interest.
  • Your MAGI is less than $80,000 a year (single) or $160,000 a year (married filing jointly).
  • You have a 1098E form which reports interest paid on a student loan.

Keep in mind a deduction is different from a credit (like the lifetime learning credit). Deductions lower your taxable income while credits reduce the amount of taxes you owe.

Tuition and Fees Deduction 
The tuition and fees deduction technically expired in 2016, but the Bipartisan Budget Act of 2018 retroactively extended some tax provisions in 2017, including this one.

What is it?

  • Up to $4,000 in qualified education expenses can be deducted.
  • You cannot claim both the tuition and fees deduction and the lifetime learning credit.

Are you eligible?

  • You paid qualified education expenses which include tuition and fees required for enrollment or attendance.
  • Your MAGI is less than $80,000 (single) or $160,000 (married filing jointly).

File Today
The sooner you file your taxes the quicker you can start enjoying that refund. Consider using your refund to pay back some of your student loan; when you finally graduate the total amount you owe will be less. Trust me, your future self will thank you (and me)!

This is the first post in a series on student finance. Look out for my next post in May on ideas for paying back your student loan faster and let me know what other money matters you’d like me to cover.

Images courtesy of the author


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