Although tax season may seem like a drag, especially when you have student loan debt, you can actually use your situation to your advantage to get a break. Don’t over look how much money you can actually get back. When you go to file your return, here are three ways you can make sure you get the most out of this year’s tax season.
Earned Income Tax Credit
The EITC, or just EIC, is for those with low income. According to Wise Bread, only about “80% of workerw who qualify for the credit claim it.” If you are married, make sure that you and your spouse do not file separately for this will automatically disqualify you from getting it. The annual income ceiling for a single individual is $14,820, but for a married couple, the ceiling is different.
Current Student Tax Credits
There are two different student tax credits that you can look into. The first is called the American Opportunity Credit. This tax credit allows “you or the person that is paying for your education to claim up to $2,500 per year for the first four years of school as you work towards a degree with at least half-time enrollment,” according to Forbes. This tax credit can be applied towards tuition and other expenses that are related to enrollment such as supplies or books. It will cover 100% of your qualified expenses up to $2,000, then it will cover only 25% of the next $2,000 of qualified expenses up to the maximum of $2,500 total. To qualify, you must have MAGI, modified adjusted gross income, of $90,000 or less.
The other credit that you can look into is the Lifetime Learning Credit. This credit is for people who want to continue their education beyond four years or go to graduate school. It allows you to claim up to a maximum of $2,000 per year for any qualified expenses related to your education. The great think about this tax credit is that there is no limit to the number of years you can claim it, however, to qualify, you must have a MAGI of $65,000 or less. If you are married, and filing jointly, your MAGI ceiling goes up to $131,000. Keep in mind though that this credit is a non-refundable tax credit, which basically means you won’t receive any excess amount that goes over the total income tax owed.
Deducting Your Student Loan Interest
You can deduct up to $2,500 each year of student loan interest on a qualified loan. To qualify, you must be enrolled at least half-time and be working towards a degree. To have a qualified loan means that you took out said loan for the purpose of paying only for your education expenses and nothing else. This loan also must not have been borrowed from a friend or an employer plan. Qualified education expenses include tuition, room and board, supplies, and other expenses necessary for your education. You can only deduct the lesser of $2,500 and must have a MAGI of $80,000 or less if you are single, or $160,000 or less if you are married and are filing jointly.
Don’t let the tax season get you down. These are just some of the ways you can capitalize on your tax return. If you are still uncertain or overwhelmed by the tax laws, then you should consult a professional. Though it may cost you a little cash, they will have the ability to find other ways to maximize your savings.