7 Tax Deductions and Credits to Save Money for College Students
While public higher education is mostly a state responsibility,
In the past 20 years, the cost of attending college has tripled and increased almost 8 times faster than wages.
the federal government does incentivize continuing education through tax deductions and tax credits.
To understand how you might take advantage of these, we’ve gathered 7 tax deductions and credits you should know to save the most money.
What is a Tax Deduction vs. a Tax Credit?
Tax deductions work to reduce your taxable income. Tax credits work to reduce your tax liability dollar-for-dollar.
1. Retirement Account Contributions
The tax code awards this behavior by offering you the ability to deduct your contributions from your taxable income if you make them into a traditional IRA.
2. Capital Gain Losses
Not all of our investments will turn out to be winners. When you choose to sell your losing positions, you can harvest these tax losses to lower your taxable income.
3. American Opportunity Tax Credit
If you pay your own way for college, you may have the ability to claim the American Opportunity tax credit.
4. Lifetime Learning Credit
If you choose to return to school to earn additional credentials, you can apply the Lifetime Learning Credit to your tax bill.
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