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tax breaksTax season is here, and it’s time to get as much back from the federal government as you put in especially for recent college graduates. Every year, it seems like it’s becoming harder to justify pursuing higher education when the cost to attend a four-year college has skyrocketed over the past 20 years. Pile all that on top of the inevitable idea that every college graduate may have to move back home because of dismal job opportunities, and you have a pretty depressing future.

With money tight for both college students and parents, it’s good to know about the available tax breaks. Collective cheers all around as we all may be able to now afford more than just Ramen Noodles after April 15. Tax season is notoriously frustrating, but we have all the 2013 tax tips you need to know.

American Opportunity Tax Credit (AOTC)

Because of the Fiscal Cliff Deal last December, the American Opportunity Credit has been extended until 2017 and potentially allows for a maximum credit of $2,500 per student for four post-secondary education years.  The credit also now covers a wider range of taxpayers whose modified adjusted gross income is less than $80,000 ($160,000 or less for married couples filing a joint return) as well as covers course materials to the list of qualifying expenses. Unfortunately, any individual who makes over $80,000 per year does not qualify. AOTC is only available to college grads filing as independents.

Lifetime Learning Credit

This credit can be used every year for tax credit because of the lack of restrictions on how many times a taxpayer can place a claim. The Lifetime Learning Credit also covers education expenses such as textbooks, tuition and supplies. Also, unlike AOTC, this credit qualifies individuals who paid for college, vocational school and classes taken at community college to improve job skills. Once the tax credit has been claimed, you could see up to $2,000 per return.

Student Loan Tax Deduction

Everyone agrees that the part about graduating from college that stinks the most is student loan debt. With all the interest you pay towards the loan, you can receive a deduction for every continuous year you pay on that interest. The Student Loan Tax Deduction of $2,500 will be reduced after this year, so it is imperative that no one misses out. The amount of deduction is based on total income. Therefore, the maximum amount of $2,500 will go to those who make under $60,000 per year ($120,000 for joint filers) while those earning more than a $60,000 income will have their deduction pro-rated. Luckily, this tax deduction is available for parents and college students filing independently.

Landing Your First Job Deductions

Here is another deduction for post-graduates who spent the year looking for a job. The stickler is that your new job must be a minimum of 50 miles away from your former home. If you have moved recently, you can deduct the cost of job-related moving expenses. Miscellaneous expenses such as the cost of printing resumes and traveling to job interviews can also be filed, but only if you have moved from one job to another in the same related field.

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14 Comments

  1. Deductions are huge for college students and people paying off their loans. I know we’ve taken advantage of them the past few years. Thanks for the roundup of deductions!

  2. Canadian students have some good deductions as well. Tuition, books and rent all give some tax relief.

    My sons use the tax credits to secure a good tax return then I get to deduct some of the remaining amount. Still 2 more years of school and deductions to go.

    1. Having good deductions are key. You need them to help out as much as you can, especially with tuition rising as fast as it is.

  3. These are some great deduction possibilities! I had totally forgotten about the reduction for student loan interest. Though, thankfully, I do not have to worry about that anymore. 🙂

    1. Neither do I John. There are so many deductions out there that I don’t even think tax professionals know about all of them.

  4. I think my mother still gets a tax rebate saying I live at home with her… It is called young adults living with parents rebate or something and discounts part of the rent and food assuming parents cover that for their adult kids.

  5. We aren’t eligible for any of these tax breaks since all of our college is paid for by grants. We thought we were going to get back a couple thousand bucks, but nope! Good thing I went to a CPA this year lol.

  6. Aw man, I wish I new about that tax credit for getting your first job more than 50 miles away from your home! Although, chances were we weren’t as lucky to have credits like that when we were looking 😉