All IRS publications are actually information booklets by the Internal Revenue Service and are designed to provide detailed guidance to the tax payers regarding tax issues. These publications never provide any line by line or specific instruction for filling out the tax forms or for filing your tax return but they actually help you with detailed answers on a number of specific issues that you might face during your tax payment.
IRS Publication 970 provides detailed information on different tax benefits that are available for the students and also for families saving for college expenses. The publication also explains the tax structure and treatment of different types of college funding such as scholarships, grants and fellowships. Three different types of tax credits that students are eligible to take advantage of are also outlined in the document and they are:
- The American Opportunity Tax Credit
- The Lifetime Learning Credit and
- The Hope Credit.
In addition to this IRS publication 970 also covers a number of additional tax benefits that include the interest rate deduction for student loans and the Educational Savings Accounts. This particular IRS publication also restricts claims of multiple tax benefits on behalf of the Internal Revenue System that is making it impossible for the tax payer to take a deduction from one class while also deducting others because that actually means two separate benefits for a single expense.
Educational credits can be really helpful to offset the cost of education and with the extended Hope Credit or the Lifetime Learning Credit. Educational expenses can be deducted from the federal income tax in full and not just from the taxable income. This particular publication can be extremely helpful for the guardians of college students to put their children through college. It is quite unfortunate that most students as well as their guardians are often not aware of the range of benefits and tax deductions that are available for them.
In the U.S. almost every kind of educational grants, fellowships and scholarships are taxable, but if they meet certain tax code requirements as mentioned in this particular publication they are deducted from the tax. Any grant or scholarship can be tax free if the recipient is a degree candidate or the money is used for paying up certain eligible educational expenditure.
The Hope Credit
With the Hope Credit it is possible to get a tax deduction of up to $ 1500 for every student and it is also possible to deduct the amount from the income tax return of any tax payer. But this credit is applicable only to the modified gross income of the tax payer.
The Lifetime Learning Credit
On the other hand the Lifetime Learning Credit works together with the Hope Credit but it is not possible to claim both of them in the same calendar year. This particular credit is worth a maximum 2000 dollars for every student and people with Modified Annual Gross Income of more than $53,000 are not eligible for this Lifetime Learning Credit.