NEWARK, Del.--(BUSINESS WIRE)--Sallie Mae, the nation’s No. 1 financial services company specializing in education, reminds taxpayers who paid college expenses or interest on student loans in 2011 that they may be eligible to take advantage of tax savings.
Low- and middle-income families may be missing out on tax benefits of higher education. In academic year 2010-11, only 45 percent of low-income families and 37 percent of middle-income families reported filing for education tax credits and student loan interest rate deductions, according to Sallie Mae’s “How America Pays for College” national study conducted by Ipsos.
“When paying for education – or taxes – every penny counts,” says Patricia Nash Christel, vice president, Sallie Mae. “Overlook, and you may overpay. Now is the time to educate yourself on the education-related tax deductions and credits that may be available to you.”
Sallie Mae recommends families closely examine the following credits and deductions to maximize their savings eligibility:
The American Opportunity Tax Credit offers a tax credit for expenses on tuition, fees and educational materials of up to $2,500 in the first four years of postsecondary education. To receive the full credit, taxpayers need to have an adjusted gross income of $80,000 or less or $160,000 for married couples filing jointly. Again this year, low-income families who owe no tax may be eligible to receive payments of up to $1,000.
The Lifetime Learning Credit only applies to expenses for tuition and fees, but students in undergraduate and graduate programs or any continuing education programs may be eligible. Taxpayers can claim up to $2,000 for qualified higher education expenses without a limit on the number of years for each student. It is important to note that a taxpayer cannot claim both the American Opportunity Tax Credit and the Lifetime Learning Credit for the same student in the same year, so the latter is typically used by students taking one course or for graduate students.
The Student Loan Interest Tax Deduction allows a taxpayer to deduct up to $2,500 for interest paid on qualified federal or private higher education loans. Taxpayers earning less than $75,000 ($150,000 for joint filers) may be eligible. To determine the Student Loan Interest Deduction, taxpayers need to obtain IRS Form 1098-E from their loan servicer. Sallie Mae customers may log in to SallieMae.com to securely download their form from their online account. Student loan interest deductions are taken as an adjustment to income.
The Tuition and Fees Tax Deduction allows a taxpayer to deduct as much as $4,000 for qualified tuition expenses and related fees, including expenses on transportation. This deduction can be claimed for the taxpayers themselves, a spouse, or dependent.
Taxpayers can also take advantage of higher education tax benefits through a 529 college savings plan. 529 plans are tax-advantaged state savings programs in which contributions can go toward qualified higher education expense. Many states offer eligible taxpayers deductions or credits for contributions into accounts in their 529 plan.
Taxpayers can even save money for college as they file. Upromise by Sallie Mae members may earn 9 percent cash back for college when they use H&R Block to file taxes.
Sallie Mae reminds taxpayers to be aware of tax refund scams. Examples are internet solicitations asking for Social Security numbers, fake flyers claiming refunds are given without eligibility, and claims for refunds or rebates based on fake statements. The IRS offers tips to help you avoid becoming a victim of these scams.
Some tax credits and deductions cannot be combined; please consult your tax adviser to determine which allow you to maximize the savings for which you may be eligible. Anyone claiming one of the credits or the Tuition and Fees Deduction will need IRS Form 1098-T from their college or university.
Sallie Mae (NASDAQ: SLM) is the nation’s No. 1 financial services company specializing in education. Whether college is a long way off or just around the corner, Sallie Mae turns education dreams into reality for its 25 million customers. With products and services that include college savings programs, scholarship search tools, education loans, tuition insurance, and online banking, Sallie Mae offers solutions that help families save, plan, and pay for college. Sallie Mae also provides financial services to hundreds of college campuses as well as to federal and state governments. Learn more at SallieMae.com. Commonly known as Sallie Mae, SLM Corporation and its subsidiaries are not sponsored by or agencies of the United States of America.