Several federal tax benefits are available to help pay for post-secondary education. These include tax credits, tax deductions and exclusions from gross income.
Additional information on federal tax benefits (Publication 970) can be obtained from the Internal Revenue Service online at www.irs.gov/Forms-&-Pubs.
Employers may provide up to $5,250 per year in educational assistance to each employee on a tax-free basis for undergraduate or graduate course, regardless of whether the education is job related. Visit with your human resources office to learn if your employer provides a qualified program. Your employer will automatically treat the educational assistance as a tax-free benefit and not include it as wages on your W-2 form.
Taxpayers may be able to claim a tax credit of up to $2,500 for qualified tuition and related expenses for each eligible student. If you qualify for a credit and have a federal income tax liability, the credit reduces your liability; however, up to $1,000 of the credit is refundable and can be claimed even if you have no tax liability.
You must meet income limits to qualify. Joint tax filers may qualify with a modified adjusted gross income of less than $180,000. Single tax filers may qualify with a modified adjusted gross income of less than $90,000. If you qualify and do not have a federal income tax liability, the credit is 40% refundable. The tax credit phases out for joint tax filers with a modified adjusted gross income of $160,000 - $180,000 and for single tax filers with a modified adjusted gross income of $80,000 - $90,000.
Taxpayers may claim up to $2,000 total per year for all eligible students per family for undergraduate and graduate study. The tax credit phases out for joint tax filers between $100,000 and $120,000 of adjusted gross income and for single tax filers between $50,000 and $60,000. The amount is based on qualified tuition and fees minus scholarships, grants and other tax-free educational expenses.
Taxpayers who take loans to pay the price of attending St. Thomas for themselves, their spouse or their dependents may deduct up to $2,500 for the interest paid on student loans. The deduction amounts are phased out at modified adjusted gross incomes of $150,000 for joint returns and $75,000 for single taxpayers.
You may be able to deduct qualified tuition and related expenses even if you do not itemize deductions on Schedule A, Form 1040. You may deduct up to $4,000 if your modified adjusted gross income is $65,000 or less ($130,000 for joint filers). You may deduct up to $2,000 if your modified adjusted gross income is $80,000 or less ($160,000 for joint filers).