This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Sallie Mae Outlines Four Tax Breaks For College Expenses

Stocks in this article: SLM

It’s tax season. Students and families who paid college expenses or interest on student loans in 2012 may be eligible for a tax break. Sallie Mae, the nation’s no. 1 financial services company specializing in education, outlines four education-related tax benefits available for tax year 2012.

There are two education-related tax credits, the American Opportunity Tax Credit and the Lifetime Learning Credit, as well as two deductions, one for student loan interest and the other for tuition and fees. Certain limitations, however, are placed on a taxpayer’s ability to claim these credits and deductions together in the same year.

The American Opportunity Tax Credit is a per-student, partially refundable tax credit. It was set to expire at the end of 2012, but it was extended through 2017. For tax year 2012, students can claim up to $2,500 for expenses on tuition, fees and educational materials in the first four years of post-secondary education. To receive the maximum credit amount, a taxpayer must have modified adjusted gross income of less than $80,000, or $160,000 for joint filers. Again this year, low-income families who owe no tax may be eligible to receive a credit refund of up to $1,000 for each qualifying student.

The Lifetime Learning Credit is a per-taxpayer, non-refundable credit of up to $2,000 that applies only to expenses for tuition and fees. Students in undergraduate or graduate programs or any continuing education program may be eligible. The credit may be claimed for any year in which qualified tuition and fees are paid. To receive the maximum credit amount, a taxpayer must have modified adjusted gross income in 2012 of less than $52,000 and $104,000 for joint filers.

The Student Loan Interest Deduction is an “above-the-line” deduction of up to $2,500 for interest paid on qualified federal or private higher education loans. To receive the maximum deduction, joint filers must have modified adjusted gross income of less than $125,000 and $60,000 for single taxpayers.

Refer to the IRS Form 1098-E to determine the amount of student loan interest paid on one or more qualified higher education loans during the year. Sallie Mae customers may log in to SallieMae.com to securely download their Form 1098-E from their online account.

The Tuition and Fees Deduction is an “above-the-line” deduction of up to $4,000 for qualified tuition expenses and related fees paid in 2012. In order to receive the maximum deduction, a taxpayer must have modified adjusted gross income of less than $65,000 or $130,000 for joint filers. Taxpayers may refer to the IRS Form 1098-T provided by their school to help them determine the amount of qualified tuition and related fees they paid during the year.

Taxpayers may also take advantage of higher education tax benefits through a 529 college savings plan. 529 plans are tax-advantaged state savings programs in which the earnings on plan contributions are allowed to grow tax-free and plan distributions are not taxed to the extent they are used to pay qualified higher education expenses. Many states offer eligible taxpayers either a deduction or a credit for contributions made to a 529 plan.

Taxpayers can even save money for college as they file. Upromise by Sallie Mae members may earn cash back for college when they use H&R Block or TurboTax to file taxes.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs