There are many different ways through which a family or student can get higher education tax benefits. There is a difference between credit and deductions. A deduction reduces the amount of income you are taxed on; a credit actually reduces the amount of tax owed. Tax credit can have a greater impact on the bottom line i.e. the total payable tax.
Student loan interest deduction
If you have taken loan for pursuing your higher education than the loan amount will be adjusted in the tax returns. The student loan interest deduction allows you to deduct up to $2,500 in interest paid on a qualified student loan during the tax year.
American Opportunity Credit
If more than one child is taking higher education in a household, the household can enjoy the American opportunity credit. The credit is up to $2,500 in qualified education expenses for every student who was enrolled in one of their first four years of post secondary education during the tax year.
Tuition and fees deduction
If you have paid fees of education for yourself, your spouse or dependent; you can claim a tax deduction on the amount paid. The tuition and fees deduction allows you to deduct up to $4,000 in qualified education expenses that you paid during the tax year.
It is very important that you are aware of all the tax exemptions from which you can benefit while filing your tax returns. You can consult a tax professional or take guidance from publication 970 at the IRS website so that you are aware of all the possible tax advantages that you can get.
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