The 1997 Taxpayer Relief Act offers significant benefits to graduate students paying for their tuition and fees. The Lifetime Learning Credit is available for tuition and fees paid after June 30, 1998. There also is a possible reduction in taxable income by deducting student loan interest payments. Tax relief is subject to income limits. More information about education related tax benefits is available in the IRS Publication 970, Tax Benefits for Education, or in the NASFAA Tax Benefits Guide.
Lifetime Learning Credit
The Lifetime Learning Credit applies to graduate students and working Americans who are pursuing lifelong learning to upgrade their skills. The credit is available on a per-tax return (family) basis and is available for tax filers whose modified adjusted gross income (MAGI) is less than $63,000 for single filers, or $127,000 or less for married couples filing jointly. The amount of the credit is phased out for filers whose MAGI is between $53,000 and $63,000 for a single filers, and between $107,000 and $127,000 for married couples filing jointly. For those who qualify, the maximum tax credit is 20% for the first $10,000 spent on tuition, or up to $2,000.
For more information, visit the IRS Lifetime Learning Credit information website and see Form 8863, Education Credits.
Loan Interest Payment Deductions
The Student Loan Interest Deduction is an income tax deduction on payment of up to $2,500 per year on student loan interest. The deduction is available for tax filers whose modified adjusted gross income (MAGI) is less than $75,000 for single filers, or $155,000 or less for married couples filing jointly. The amount of the credit is phased out for filers whose MAGI is between $60,000 and $75,000 for a single filers, and between $120,000 and $155,000 for married couples filing jointly. While there is no minimum amount of interest a qualified filer can deduct, those who paid $600 or more of interest on a qualified student loan during the year, you will receive a Form 1098-E, Student Loan Interest Statement from the financial institutions, governmental units (or any subsidiary agencies), educational institutions or any other person to whom the interest was paid.
For more information, visit the IRS Loan Interest Payment Education information website and see Form 8917, Tuition and Fees Deduction.