USA Funds helps families identify potential tax savings
Jan 8, 2008
USA Funds® (January 8, 2008) - Advises college students, former students and their parents that they may be able to reduce their federal income tax bills if they paid certain college expenses during 2007.
“In recent years the U.S. Congress has enacted measures that have expanded federal income tax benefits for families that pay tuition, fees and other higher education expenses,” said Carl C. Dalstrom, USA Funds president and CEO. “USA Funds urges taxpayers to consider potential tax benefits that may apply to them as they prepare their 2007 income tax returns.”
Among the higher education tax benefits for the 2007 tax year are the following items:
- Student loan interest deduction. Taxpayers who paid interest on qualified student loans during 2007 may be eligible to deduct up to ,500 from their taxable income. Income limits to qualify for the deduction are higher in 2007. Single taxpayers with modified adjusted gross incomes of less than ,000 and married taxpayers who file joint tax returns reporting modified adjusted incomes of less than 0,000 may qualify for at least a partial deduction.
- Hope and Lifetime Learning credits. The maximum income permitted to qualify for the Hope and Lifetime Learning tax credits has been increased. Single taxpayers with modified adjusted gross incomes of less than ,000 and married taxpayers filing jointly with incomes of less than 4,000 now qualify for at least a partial credit. On the other hand, tax provisions that offered larger Hope and Lifetime Learning tax credits to residents of portions of Alabama, Louisiana and Mississippi affected by the 2005 hurricanes have expired and will not apply to 2007 returns. The Hope tax credit permits taxpayers to reduce their taxes by as much as ,650 per student for out-of-pocket tuition and fees for each of the first two years of postsecondary study. The Lifetime Learning credit provides a maximum ,000 credit based on qualified tuition and related expenses paid for any year of postsecondary study.
- Deduction for higher education expenses. Taxpayers whose incomes exceed the limits to qualify for the Hope and Lifetime Learning tax credits may consider this deduction. The maximum deduction of ,000 is available to single taxpayers with modified adjusted gross incomes of ,000 or less, or married taxpayers with incomes of 0,000 or less. Single taxpayers with incomes greater than ,000 but not more than ,000, and married taxpayers with incomes greater than 0,000 but not more than 0,000, may qualify for a deduction of up to ,000. Taxpayers don’t have to itemize their deductions to claim this benefit.
- Other higher education tax benefits. Taxpayers also should consider potential tax savings based on earnings from so-called 529 college savings plans and Coverdell Education Savings Accounts, as well as employer-paid education benefits.
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