You might benefit from federal income tax benefits for education expenses.
Tax credits for higher education expenses:
- The American Opportunity Credit allows you to claim up to $2,500 per student per year for the first four years of school as the student works toward a degree or similar credential.
- The Lifetime Learning Credit allows you to claim up to $2,000 per student per year for any college or career school tuition and fees, as well as for books, supplies, and equipment that were required for the course and had to be purchased from the school.
Student loan interest deduction:
- You can take a tax deduction for the interest paid on student loans that you took out for yourself, your spouse, or your dependent. This benefit applies to all loans (not just federal student loans) used to pay for higher education expenses. The maximum deduction is $2,500 a year.
IRA withdrawals for college costs:
Qualified Tuition Programs (QTPs; also known as 529 Plans):
- A QTP/529 plan is established by a state or school so that you can either prepay or save up to pay education-related expenses. Once you’re in college or career school and you withdraw money from your account to pay your education expenses, the money you withdraw will not be taxed. Learn more about state 529 plans. To find out whether the college you plan to attend participates in a QTP, ask the financial aid or admissions staff.
- The TNStars College Savings 529 Program is Tennessee’s own 529 program, a program that is designed to make college savings easy.