Dear Dick:

I have two children attending two high priced Boston colleges.  My son is a junior, and my daughter is a sophomore.

So, I have two more years of tuition checks to write.

Are there any tax writeoffs I can take to get some relief from the high cost of tuition expense?

“Over-educated and Over-Taxed”

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Dear “Over-educated and Over-Taxed,”

I agree, it costs a small ransom to send children to college these days.

But you may benefit from some tax relief for higher education expenses paid or incurred this year.

Consider the following tax breaks and apply them to your tax situation.

1. American Opportunity Tax Credit (AOTC): The maximum AOTC credit is $2.500 for qualified expenses—such as tuition, room and board, fees, supplies and equipment—during the first four years of study.

However, the AOTC credit is subject to a high income phase-out limitation. For 2022, the phaseout range is between $80,000 and $90,000 for single filers; $160,000 and $180,000 for joint filers.

You can claim the AOTC for every eligible student in your family. So, if you have two kids in college at the same time, you may be eligible for a credit of $5,000.

2. Lifetime Learning Credit (LLC): This credit is comparable to the AOTC, but less generous.

Note:

·      The maximum LLC is $2,000 regardless of the number of students in the family.

·       The LLC is phased out at lower levels than the AOTC. For 2022, the LLC is available if the phase-out income is $80,000 or less for single filers; $160,000 or less for joint filers.

You can claim either one of the credits  AOTC or LLC, but not both.

If you take a close look at your tax return, you will usually come out ahead if you choose the AOTC.

3. Tuition-and-fees deduction: This is a tax deduction worth up to $4,000.

But you can’t claim the tuition and fees deduction if you take either one of the two higher education credits discussed above.

Depending on your income, the deduction is up to $4,000.

For single filers, the deduction is up to $4,000 for income up to $80,000.  For joint filers, the deduction is up to $4,000 for income up to $160,000.

No deduction is available if income is above the thresholds.

4. Student loan interest deduction: If you paid interest on a loan this year 2022, you can deduct paid interest on a student loan up to a maximum of $2,500.

Note: The deduction for student loan interest has a high income phase out. For 2022, the student loan interest deduction is available for single filers if income is below $85,000; less than $170,000 for joint filers.

Finally, this deduction is available only to the taxpayer obligated to repay the loan. Since we are dealing with a student loan, this interest deduction is usually claimed by the student—not the parents.

If you have any questions, please contact Richard Soo Hoo CPA at (508) 954-6270 or richardsoohoocpa@gmail.com

SAMPAN, published by the nonprofit Asian American Civic Association, is the only bilingual Chinese-English newspaper in New England, acting as a bridge between Asian American community organizations and individuals in the Greater Boston area. It is published biweekly and distributed free-of-charge throughout metro Boston; it is also delivered to as far away as Hawaii.