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The National Association of Student Financial Aid Administrators (NASFAA) has just published its 2017 Higher Education Tax Benefit Guide to help families learn about the credits and deductions they can claim on their upcoming tax returns if their children are attending college.
"Many families overlook these benefits each year due to confusion surrounding tax credit options," said Megan Coval, NASFAA vice president of policy and federal relations in a statement.
"As the cost of obtaining a higher education continues to increase, we encourage parents to and students to take every opportunity to educate themselves about their finances and take advantage of benefits that can help ease the financial burden of paying for college."
(Related: How American Families Pay for College: 2017)
In addition to explaining available tax benefits, the guide provides links to relevant IRS publications and highlights changes to benefits that were available previously.
Changes to Benefits for the 2017 Tax Year
The tax deduction for tuition and fees, which was due to expire at the end of 2016, was not extended in the new tax cut law, leaving many to believe that it had expired. But the combination of the Bipartisan Budget Act of 2018 that Congress passed in February followed by the 2018 omnibus spending bill that it passed last Friday extended the deduction through the end of 2017. It is an "above the line deduction," meaning that taxpayers don't have to itemize to take it.
It's worth a maximum $4,000 for qualified educational expenses and is available for single taxpayers whose modified adjusted gross income (MAGI) is $80,000 or less and for married taxpayers filing jointly with an MAGI of $160,000 or less.
Taxpayers can also claim a maximum $2,500 deduction for the interest payments on student loans but the MAGI cap for that deduction has been raised slightly for married couples filing jointly.
The cap for them is $165,000 modified adjustable gross income (MAGI), up from $160,000 for the 2016 tax year; for single filers the cap is unchanged at $80,000. Phaseouts for the deduction begins at $135,000 for couples filing jointly and $65,000 for singles.
This deduction is also available for non-itemizers but cannot be used by those who are married and filing separately or by a someone who can be claimed as a dependent on another's tax return. Also, the deduction can only be used for qualified loans used to fund expenses such as tuition, fees, books, and room and board for students enrolled at least half-time at an accredited institution.
