Tax Credits

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Tax Credits and Higher education provision in the new U.S. Federal Tax Law

Graduate students may claim the Lifetime Learning Credit, a non-refundable tax credit equivalent to 20% of the first $5,000 of out of pocket tuition and fee expense made within a tax year. After 2002, the credit amount is equal to 20% of the taxpayer's first $10,000 of out of pocket qualified expenses. One such credit is available per family. Eligibility for the credit is prorated for single tax filers with incomes between $40,000 and $50,000 and joint filers with modified AGI between $80,000 and $100,000.

Students may also make penalty-free withdrawals from traditional IRAs for higher education expenses and utilize the new Education IRA.

You may be able to deduct interest you pay on a qualified student loan. This applies to interest payments due and paid after 1997. This deduction is an adjustment to income and may be claimed even if you do not itemize deductions. Eligibility is phased out based on modified AGI. You may also exclude from your gross income interest on qualified US savings bonds if you have qualified educational expense during the redemption year.

HR 1836, the Economic Growth and Tax Relief Reconciliation Act of 2001 made changes to tax law provisions affecting education. To comply with the Congressional Budget Act, all provisions generally expire on December 31, 2010. For further information, contact your tax advisor, the Internal Revenue Service, or refer to the EdFund publication Tax Benefits for Higher Education enclosed with this application package. Saybrook University does not provide tax advice and does not guarantee the accuracy or timeliness of the information provided above. For accurate and current information concerning these benefits, contact your tax advisor or the US Internal Revenue Service. You may request Publication 970: Tax Benefits for Higher Education. This publication is also available from the Saybrook Financial Aid Office.

Online Resources
www.ed.gov