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Tax Deductions for College Students 2018 - YouTube
Channel: The Bemused: Making Sense of Money 馃挵
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Hey, Wealth Builders and welcome back to The Bemused today I'm going to be covering
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three tax breaks the American
Opportunity Tax Credit the Lifetime
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Learning credit and the student loan
interest deduction if you're a college
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student or a recent college graduate
even a college dropout or you're the
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parent of one you're gonna want to know
about these tax breaks so make sure you
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keep on watching we've had a ton of new
people join the squad over the past
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couple of weeks so if you're new around
here
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hello I'm Akeiva and I'm a 21 year old
financial planner I run this channel
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along with my boyfriend Meshack and
together we talk about all things
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personal finance for young adults just
like us we are so glad you're here
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joining us on this journey so I've seen
a lot of misconceptions floating around
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out there on the interwebs about the tax
credits and deductions that are
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available to college students like this
one for example so it's time to clear
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the air and learn the facts there's a
lot to know but I'm gonna try to keep
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this at a high level
first up the American Opportunity Tax
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Credit which I will hereafter referred
to as the AOTC because there's but so many
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times you want to hear me say American
Opportunity Tax Credit before leaving
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the video so here's the overview the AOTC is a tax benefit related to money that
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has been paid for college expenses as it states in the name this is a tax
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credit which means that it directly
reduces the tax that you owe dollar for
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dollar on top of that forty percent of
the credit may be refundable so for
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example this means that if your tax owed
before the credit was a thousand dollars
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and your AOTC amount is two thousand
dollars you could be refunded up to
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eight hundred dollars which is 40
percent of 2000 so how much is the
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credit the maximum credit allowed is two
thousand five hundred dollars per
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student this represents the sum of a
hundred percent of the first two
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thousand dollars of qualified education
expenses plus 25 percent of the next two
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thousand dollars of qualified education
expenses so you would have needed to pay
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or taken out in student
loans at least $4,000 to claim the full
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amount of the credit so what are
qualified education expenses for this
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credit it means tuition and fees and
books it does not include room and board
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health insurance or anything like that
you must also have been enrolled in
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school at least half time in a degree
seeking program to claim the credit to
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be able to claim the AOTC the law
also requires that your school give you
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what's called a 1098-t which your school
will give you by January 31st assuming
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they're following the rules so who can
claim the credit generally it's
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whoever's claiming you as a dependent on
their tax return so more often than not
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that means your parents this credit can
be claimed for a maximum of only four
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years so if you've been in school longer
than four consecutive years and you or
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your parents have taken this credit on
your behalf for each of those four years
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you can't take the credit also there are
income limitations so if you or your
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parents make more than 180 thousand
dollars of income if they're filing
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status is married filing jointly for
more than $90,000 for any other filing
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status you can't claim the credit
unfortunately you also can't claim the
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credit if you're a non-resident alien oh
and it's also important to note that you
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can't take the aoc see if the student
has been convicted of a felony for
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possessing or distributing a controlled
substance just FYI now let's move on to
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the Lifetime Learning credit the
Lifetime Learning credit is another tax
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benefit that's related to money that's
been paid for college expenses again
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this is a tax credit which means it
directly reduces the tax that you owe
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dollar for dollar however unlike the a
OTC this credit is not refundable so it
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cannot trigger a refund so how much is
the credit also unlike the a OTC the
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maximum credit allowed is $2,000 per
return so not per student but per return
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this time which represents 20% of
qualified education expenses up to
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$10,000 so you'd need to have $10,000 of
qualified education expenses paid in
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order to get the full $2,000 correct so
what are qualified education expenses
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just like the a OTC it's just tuition
and fees and books so no room on board
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no health insurance etc
but unlike the a OTC you don't have to
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be in a degree seeking program in order
to claim the credit you can claim the
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last time learn a credit for courses
that you take to acquire or improve job
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skills even if it doesn't lead to a
degree and again you must have received
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your form 1098-t from your school which
is will give you by January 31st who can
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claim the credit like before whoever's
claiming you as a dependent on their tax
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return is the one taking the tax credit
unlike the a OTC the Lifetime Learning
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credit can be claimed for an unlimited
number of years this will be one of the
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tax credits that I'm gonna be claiming
all my taxes this year because as you
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guys know I have completed my four years
of undergrad and I just finished up grad
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school so after four years I could no
longer take the AOTC so I'll be taking
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the Lifetime Learning credit and unlike
the AOTC the income limits on this
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credit are lower a hundred and thirty
four thousand dollars for married filing
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jointly and 67 thousand for a single
folk the most important thing to
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remember is that you can claim either
the AOTC or the Lifetime Learning
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credit per student but not both no
double-dipping
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and lastly the student loan interest
deduction the student loan interest
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deduction is a tax benefit related to
well student loan interest that's been
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paid unlike the two tax credits that we
discussed earlier this benefit is a
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deduction which means it reduces the
amount of your income that is subject to
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tax how much is the deduction it's the
actual amount of interest that you paid
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within the year subject to a cap of
$2,500 your student loan servicer will
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issue you a 1098 e which is different
from the 1098-t that we discussed
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earlier showing you how much interest
you paid throughout the year who can
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claim the deduction whoever took out the
loan so as you guys know my dad took out
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a Parent PLUS loan for me when I was in
undergrad so even though I'm the one
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who's been paying back the loan my dad
is the one who's getting the student
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loan interest deduction on his tax
return the student loan interest
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deduction can be claimed for an
unlimited amount of years and the income
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limits are 165 thousand for married
filing jointly and 80 thousand dollars
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for the single people now you can take
this
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duction in conjunction with either the a
OTC for the Lifetime Learning credit so
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that's what I'll be doing this year I'll
be taking advantage of the student loan
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interest deduction and the Lifetime
Learning credit for more information on
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tax benefits for education check out the
IRS Publication 970 I don't know if
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they've updated it for the 2018 tax
year yet but I'll link to the most
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current version I can find in the
description box below let us know what
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tax questions you like to have answered
in the comments below whether anything
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we discussed in today's video or
something totally separate and if you
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haven't yet don't forget to hit that
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notification bell so you never miss when
we post new videos as a reminder we're
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sharing short tax tips every day in the
month of January over on our Instagram
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page to help you own your taxes this
year so make sure you check us out over
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there thanks so much for watching and
I'll see you guys in the next video
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