How to Get the Most From Education Tax Breaks

Education Deductions

Rather than take the Hope or Lifetime Learning Credits, filers with taxable income of $65,000 ($130,000 if filing jointly) or less can deduct $4,000 per year for college tuition and fees paid for themselves, their spouse or a dependent.

The student must have been enrolled at least half-time in a qualified degree or certificate program. Filers who earn between $65,000 and $80,000 ($130,000 to $160,000 for joint filers) can deduct $2,000. Details are available in Publication 970.

Pending congressional approval, parents will also be able to deduct up to $2,500 per year worth of interest paid on school loans, provided the parents are paying loans that the child took out when he or she was a dependent.

Assuming Congress passes this provision, you will be able to deduct this interest for the life of the loan. As with the Hope and Lifetime Learning credits, the benefit phases out after certain income levels: between $55,000 and $70,000 ($115,000 and $145,000 if you file a joint return).