Your Tuition and Taxes: What You Need to Know
As a college student, it is important to understand how the new tax bill could impact your tuition costs. The Tax Cuts and Jobs Act was signed into law in December 2017, and there are a number of provisions that could affect the way students and their families pay for college.
One key change in the tax bill is the elimination of the tuition and fees deduction. This deduction allowed taxpayers to deduct up to $4,000 in college tuition and fees from their taxable income. With this deduction gone, students and their families may see an increase in their overall tax liability.
Another significant change is the expansion of the American Opportunity Tax Credit (AOTC). This credit allows eligible taxpayers to claim up to $2,500 per student for tuition, fees, and course materials for the first four years of post-secondary education. The income phase-out range for the AOTC has also been increased, making it available to more families.
However, the AOTC is not available to students who are claimed as dependents on someone else’s tax return. This means that many college students who are still being supported by their parents may not be able to take advantage of this credit.
Additionally, the tax bill has made changes to the treatment of student loan debt. Under the new law, the deduction for student loan interest remains intact, allowing borrowers to deduct up to $2,500 in interest payments from their taxable income. This can provide some relief for students who are struggling to repay their loans.
Overall, it is important for college students and their families to carefully review how the tax bill may impact their finances. While some provisions such as the expansion of the AOTC can provide benefits, the elimination of the tuition and fees deduction could offset these gains for some families.
As tax season approaches, it is a good idea to consult with a tax professional to understand how the new tax bill will affect your individual situation. By staying informed and taking advantage of available tax credits and deductions, students can better manage their tuition costs and overall financial well-being.
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