credits

8 Tips for Going Back to School as an Adult

Carrie Kirby — Mon, 27 Nov 2017 09:30:10 +0000

Whether you have never been to college, have some college credits from many years ago, or simply need to retool your education for a career change, there is much to be gained from going back to school. However, adult learners face a lot of risk factors that lead to dropping out before finishing a degree; things such as family obligations, financial shortcomings, and a tendency to attend school part time.

With college costs steadily growing, the stakes are high; attending school without finishing a degree program could mean dealing with a mountain of debt and no job to help pay it off. Before diving into a degree or certificate program, do your homework to give yourself the best chance of success as an adult learner.

1. Choose a school that accommodates adult learners

One challenge adult learners face is feeling like they don't fit in with the much younger students on campus. Some find that the counseling services the school offers do not make sense for their situation in life. To avoid this problem, seek out a school that actively recruits older students.

LendEdu ranks the 25 best colleges for adult learners, taking into account factors such as on-campus child care, weekend classes and flexibility, and affordability. Its most recent list gives the top-ranking position to Delaware's Wilmington University, a private college that offers a wide range of professional certificate programs in addition to degrees.

2. Consider credit transferability when choosing a school

Another way the best schools accommodate nontraditional students is by accepting credits from other institutions. If you have earned prior credits from an educational institution, get an idea of how many would be accepted toward your new degree. Figure this out before enrolling, because the more credits that will transfer, the faster and cheaper your degree will be.

3. Choose a major that will help you reach your goals

Some 18-year-olds are OK with spending a couple of years in college finding themselves before focusing on a major that will lead to a specific career. Adults, not so much.

A recent report from the University of Texas showed that the choice of academic major was the biggest factor in determining how much graduates from UT earned. In fact, your major appears to matter more than how good a school you get into, the report says.

"[G]raduates who majored in architecture and engineering at a UT System open-access college have median earnings that are higher than 61 percent of all UT System graduates at selective colleges," the report reads. After architecture and engineering, the highest earning major categories for UT students were computers, statistics, and mathematics; followed by health, then business. The lowest-earning majors were in the arts, psychology and social work, and biology and life sciences.

Of course, you can't just blindly choose a major based on how much money graduates make. It also has to be a good match for you. Take an online assessment or work with a career consultant to figure out what field best matches your strengths.

4. Tap a range of funding sources

Don't assume that because you're an adult, you won't qualify for aid. In fact, there is no age limit for receiving federal student aid in the form of grants, loans, and work-study programs. There are also scholarships for adult learners, such as the Jeannette Rankin Foundation Scholarship, reserved for students age 35 or older. If you are or have been in the military, there are a host of student financial aid programs for veterans and military personnel. Also, find out if your employer pays for continuing education; many workplaces will fund entire degrees for employees. (See also: These 17 Companies Will Help You Repay Your Student Loan)

Once you have exhausted every avenue for funds you don't have to pay back, look into using your own assets for school as well. Although you should always proceed with caution when tapping into retirement accounts, it is possible in some circumstances to withdraw money from retirement accounts to pay educational expenses penalty free. (See also: Yes, You Can Pay for Education With an IRA)

5. Investigate online or hybrid programs

Going to school around a busy schedule of work and family makes online college a popular choice. You can often watch lectures on your own schedule and avoid wasting time traveling to and from a campus. You can try many online courses for free — usually without credit — to see if online learning works for you. Check the courses listed at edX, for example.

A growing program type that appeals to many nontraditional students is the hybrid model, which combines online lectures with some classroom time for discussion. For instance, Northwestern University offers hybrid graduate programs aimed at professionals, which combines online lectures with a limited number of on-campus seminars.

6. Take your exams early

If you need to take the LSAT for law school, the GRE for graduate school, the GMAT for business school, or even the SAT, sit for it well in advance of school application deadlines. This takes a bit of the pressure off; when you know you have time to retake the test if necessary, you can relax and do your best.

7. Make a plan to balance life, work, and school

It could be that many adult learners end up dropping out because they mistakenly assumed they would somehow "find time" for coursework. Even if you start slow, going to school is like a part-time job, and you must allocate the hours to make it happen. Finding the hours might mean cutting back on work, eliminating a pleasurable activity such as watching TV, or dropping out of organized activities such as a sports team. One activity you cannot borrow hours from without negative consequences is sleep.

It's also important to make sure family members, friends, and even coworkers and bosses know and respect that you need time and space to complete your coursework. You may have to say no when someone asks you to work overtime or pass up on volunteering for organizations you may have helped in the past.

Research shows that when we work with interruptions, not only does it take time to get back on task, but we feel more stressed and frustrated. To avoid wanting to quit, it's important to carve out space for yourself to work uninterrupted. Build child care costs into your college budget if necessary, and make sure you have a quiet place to work away from the bustle of household life.

8. Know the tax benefits

Make sure you don't miss out on tax breaks available for returning students, such as the American Opportunity Tax Credit, the Lifetime Learning Credit, and tax deductions on interest on student loans. (See also: Don't Skip These 8 Tax Breaks for Students)

Like this article? Pin it!

This article is from Carrie Kirby of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

7 Lessons From Tax Day to Remember for Next Year

Tim Lemke — Fri, 21 Apr 2017 08:00:10 +0000

Cue the sigh of relief: Another tax season has come and gone. Before you kick back and relax, though, take a little moment of self-reflection. Did Tax Day make your stress levels soar?

If the answer is yes, it's time to brush up on a few key lessons to take with you into the 2017 tax year. We guarantee you'll be breathing a little easier come next April.

1. Keep track of all your income

Specifically, don't forget about taxes you'll need to pay on any income you earn during the year outside of a full-time job. This includes money from freelance work or self-employment, dividends on investments, interest payments, and even gambling winnings. Be sure to track all of this income so that you're not surprised by a tax bill later.

2. Save all of your paperwork

Make sure you keep careful track of any forms and paperwork necessary to file your taxes. This includes your W-2 or any 1099s, as well as documents from banks, investment firms, and your mortgage company. These forms are usually sent out in February.

More immediately, if you make any contributions to charity, you'll need the documentation. If you own a small business, you'll need receipts for all expenses you plan to deduct. If you plan to seek deductions for any unreimbursed medical expenses, you'll need a bill from your health care provider. All of these are important in order to enter accurate information on your tax return. As you gather them throughout the year, set them aside in a file or box that you keep in a safe place.

3. Deductions and credits are your friends

A credit is a straight reduction in your tax bill. A deduction means you reduce the amount of your income that is taxable. Either way, these tax breaks should not be overlooked.

You can get a tax credit for having a kid. You can get a tax deduction if you pay interest on your mortgage. You can get a tax deduction for charitable donations. There are even deductions and credits for using energy-efficient appliances or driving a hybrid car. The list of possible deductions and tax credits is massive, and chances are, you qualify for at least a few. Most tax preparers and tax preparation programs will walk you through these deductions and credits to make sure you're getting the maximum benefit. If you haven't paid much attention to potential tax deductions or credits in the past, however, make sure you start this year. It could save you significant money.

4. Understand how tax-advantaged investment accounts differ

In addition to claiming tax credits and deductions, you can reduce your tax bill in advance simply by saving for retirement. If you use a 401(k), traditional IRA, or Roth IRA to build your nest egg, there are considerable tax advantages, and you need to understand the main differences.

With a 401(k) and traditional IRA, any money you contribute to your account throughout the year will be deducted from your taxable income now. In some cases, this could move you into a lower tax bracket and save you considerable money on this year's tax bill. With a Roth IRA, money you contribute is taxed now, but you will not have to pay taxes on any investment gains when you withdraw the money at retirement.

5. If you are getting a big return, that's not a good thing

Getting money back on your taxes is certainly better than owing so much to the IRS that you pay a penalty. But if you are getting a considerable amount back after filing your return, you may have had too much taken out of your paycheck and overpaid taxes throughout the year. So in a sense, the government has been holding onto your money interest-free for no reason when you could have been using it for yourself. To make sure this doesn't happen again, ask your employer for a new W-4 and increase the number of exemptions you claim.

6. If you make a mistake, you can amend your return

Tax time can be nerve wracking because people are petrified of making a mistake and having the IRS come after them. But the actual chances of the government knocking on your door are quite low. The IRS simply does not have the staff to audit many individuals, and when they do, they usually target either very wealthy people or people with very complicated tax returns.

If you do discover that you made a mistake, you can file an amended return without much hassle. Simply file Form 1040X, Amended Tax Return, along with the corrected (or missing) documents you did not originally file with your return. This happened to me once when I forgot to report some dividend income, and I never had the taxman knock on my door. (See also: The Easiest Way to Avoid a Tax Audit)

7. Use your taxes as a learning opportunity

Even with all these lessons under your belt, tax time can still be a tedious and stressful time of year. When all else fails, change your perspective. I personally find the process of doing taxes to be fairly educational. You can see a clear picture of how much money you actually took in during the year, and how much the government takes. The process of finding deductions can be a learning experience as well. If you approach doing your taxes with an attitude of curiosity, you may find the whole process to be less painful.

This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

10 Surprising Ways Real Estate Cuts Your Taxes

Damian Davila — Fri, 24 Feb 2017 10:00:13 +0000

Once you own property, you may be eligible for a long list of tax breaks, whether you use it as your primary home, for rental income, or sell it for profit. Let's run through familiar benefits, such as the mortgage interest deduction, and also the various (stunning!) tax breaks real estate investors, landlords, and homeowners enjoy.

1. Mortgage Interest

This is the most familiar of all deductions and one of the very few times that you can use the interest that you're paying to reduce your tax bill. Besides deducting mortgage interest that you're paying for the purchase of your primary residence, you can also deduct mortgage interest from a second mortgage or a home equity line of credit (HELOC).

You can deduct up to $500,000 ($1 million if married filing jointly) in all mortgage interest used to buy, construct, or make substantial improvements in your first home (and second, if applicable). You can't, however, deduct any mortgage interest for purchases on a third home and so on. You can also deduct up to $50,000 ($100,000 if married filing jointly) from all home equity debt for reasons other than to buy, build, or substantially improve your first or second home.

2. Mortgage Interest Credit

Recipients of a mortgage credit certificate (MCC) by a state or local government under a qualified mortgage credit certificate program could be eligible for a federal income tax credit of up to 20% of their annual mortgage interest. Figure this credit on Form 8396. The best part is that the remaining 80% of your mortgage interest is still eligible as a deduction!

3. Points

Charges paid by a borrower to secure a mortgage (also known as origination fees, maximum loan charges, or discount points) can generally be deducted. However, if you were to pay points to refinance an existing mortgage, you would amortize the points over the life of the mortgage. When you refinance a loan, your lender will send you a Form 1098 listing the points that you paid, but in the event that they don't, look for your points in your HUD-1 settlement sheet.

Page 6 of IRS Publication, 936 Home Mortgage Interest Deduction provides a useful diagram to determine whether or not your points are fully deductible for this year.

4. Real Estate Taxes

You can deduct real estate taxes, including state, local, or foreign, you paid on real estate you own that wasn't used for business. Tally only taxes paid to government institutions and don't include itemized tax charges for services to specific property or people, such as a gardener or trash collection service. If you were to sell your property and receive a refund or rebate of real estate taxes, you would reduce your deduction by the amount of the refund or rebate.

5. Mortgage Insurance Premiums

You can deduct eligible mortgage insurance premiums provided by government authorities, including the Department of Veterans Affairs, the Federal Housing Administration, and the Rural Housing Service, as well as private mortgage insurance (PMI) issuers on loans issued after December 31, 2006. (See also: What Is Private Mortgage Insurance, Anyway?)

In 2017, you can't deduct your mortgage insurance premiums if your adjusted gross income is more than $54,500 ($109,000 if married filing jointly). If your adjusted gross income falls between $50,000 and $54,500 ($100,000 and $109,000 if married filing jointly), your deduction is limited and you must use the Mortgage Insurance Premiums Deduction Worksheet to figure your deduction.

6. Capital Gains Exemption

Eventually, you may sell your real home. Depending on several factors, such as years of ownership, substantial improvements, and neighborhood developments, your home may have appreciated by several thousands of dollars. To lessen the tax hit on taxable capital gains from the sale of your property, the IRS may exempt up to $250,000 ($500,00 if married filing jointly) of that gain from your income.

In general, you qualify for a capital gains exemption as long as you have owned and used your home as your main home for a period aggregating at least two years out of the five years before its date of sale. Consult Publication 523, Selling Your Home for more details. The beauty of this tax break is that there is no restriction as to how many times you can use it!

7. Investment Interest

Real estate investors also get a tax break on interest paid on money they borrowed that is allocable to property held for investment. Such investors need to use Form 4952 to figure out their investment interest expense deduction.

Despite its name, this investment interest deduction doesn't cover interest gained from passive-income activities or securities that generate tax-exempt income.

8. Expenses for Business Use of Homes

Freelancers, independent contractors, and small business owners can deduct expenses for business use of their homes. With Form 8829, you can claim the area used regularly and exclusively for business to allocate a deductible portion from a wide range of expenses, including utilities and depreciation.

If your deductions for home business are greater than the current year's limit, you can carry over the excess to 2017! This carry-over will be subject to the deduction limit for that year, whether or not you live in the same home during that year.

9. Tax Credits for "Green" Improvements

To encourage more energy efficient home improvements, the IRS provides tax credits for qualifying expenses. Here are two examples:

Windows, doors, and skylights that met the ENERGY STAR program requirements and were installed between January 1, 2012 and December 31, 2016 at the homeowner's primary residence may grant you up to $500 in energy efficiency tax credits.
Solar energy systems provide a tax credit of 30% of cost with no upper limit through December 31, 2019. The credit will decrease to 26% in 2020, drop to 22% in 2021, and goes away in 2022.

To learn about other tax credit opportunities from energy efficient home improvements, visit EnergyStar.gov.

10. Deductions From Rental Income Activities

Rental real estate provides several tax breaks to landlords. For example, landlords could potentially deduct:

Local transportation expenses to collect rental income or to manage, conserve, or maintain rental property;
Expenses for managing, conserving, or maintaining rental property from the time it was made available for rent;
Depreciation expenses for the wear and tear of rental property;
Local benefit taxes for maintaining, repairing, or paying interest charges for the benefits;
Legal and professional fees directly related to operating expenses; and
Prepaid insurance premiums.

To learn the full list of rental expenses and guidelines for deduction, consult Publication 527, Residential Rental Property. If you use some of your rental properties for personal purposes throughout the year, then you should hire a tax pro to appropriately deduct expenses for rental income. Hiring an accountant to report income from your rental activities is itself an eligible deduction, after all! (See also: 4 Times You Should Splurge and Hire a Pro)

This article is from Damian Davila of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How Your Child Can Earn College Credits in High School (For Cheap)

Ashley Eneriz — Tue, 15 Nov 2016 10:00:14 +0000

College credits are expensive. Even a class at a community college can add a few hundred dollars to your overall tuition bill. For most undergrad degrees, the first two years are devoted to general education basics that don't necessarily impact an individual's future career. For example, to get my degree in English, I still needed to take Biology and Calculus classes.

There are a few methods that will allow high school students to earn college credits before they actually enter the college scene. Doing so can help them shave off a semester or even a whole year, which translates into a lot of money saved, depending on your college's cost per unit. (See also: 9 Freshman Shopping Tips to Cut College Costs)

Take CLEP Exams

The College Level Examination Program allows students to earn three credits or more on passed CLEP tests. There are 33 tests that can be taken and there are currently 2,900 colleges and universities that will accept credit for passing CLEP.

According to CollegeBoard, "More than 60% of CLEP test takers said that they relied on their high school course work to learn the material needed for their CLEP exam(s)."

The average college course costs $900, and the cost of CLEP is $80. If your child is able to pass five CLEPs, then it will cost you $400, but potentially save you $4,100 in tuition.

Every university has their own set of rules, so make sure you know how many credits from CLEP tests they will accept beforehand. It is also wise to know how many CLEPs are applicable toward your major. For example, the college might accept 10 CLEPs, but a specific major might only need eight of those. You don't want to waste time or money taking CLEPs that cannot be applied to your degree.

Take AP Tests

Many schools offer AP courses, which are more demanding that typical high school courses. Not only do AP courses look impressive on college applications, but they can count as college credit if students pass the exam.

AP courses and fee exams differ for each school. The standard fee for each exam is $93. A reduced fee is available for low-income families. Some schools might charge additional fees for proctoring and administering the course and exam.

Even if your child's school does not offer a certain AP course, your child can still take the exam. You will need to find an authorized testing center, and know that the test might be harder for individuals that did not take the specialized course for the entire year.

Enroll in International Baccalaureate Courses

Depending on the high school, students can take singular IB courses or choose to pursue an IB diploma. An IB diploma is challenging, but it can shave a whole year off a student's college experience. Unfortunately, IB is a smaller program than AP, and is not as widely offered. However, if your child's school does offer IB courses, it is possible that they can transfer for more units than an AP course, depending on the college and course.

Check with your child's school to see the exact cost of the IB program. As an example, Davis School District in Bountiful, Utah charges $864 for an IB diploma, which comes with six exams, on top of a $168 registration fee. However, they say their average IB students complete high school with 44 college credits, which comes out to the affordable price of $23.45 per unit. That is a huge difference from the usual $200–500 per unit cost that community and state colleges charge.

Take College Classes While in High School

Depending on your child's high school and community college regulations, your child can enroll in limited college courses while still in high school. Some college courses require prerequisites and you might need to gain signed authorization from your child's high school principal before they can dual enroll.

This option can cost more than AP classes or IB courses, but it can also be more flexible. Community college courses can be demanding, but for a student that is dedicated, it is more than likely they will pass the class. It can be disheartening to take a rigorous AP course only to have your credit riding on passing one exam.

Also with community colleges, your child will have access to online class options, help from professors, and summer class options.

This article is from Ashley Eneriz of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

13 Crucial Social Security Terms Everyone Needs to Know

Damian Davila — Mon, 10 Oct 2016 10:30:09 +0000

All Americans expect to receive Social Security benefits during their retirement years.

According to the latest data from the Employee Benefits Research Institute, 91% of U.S. retirees and 84% of U.S. workers expect Social Security to be a major or minor source of income during retirement. And since about a third of Americans have less than $1,000 saved for retirement, it's not surprising that many expect Social Security benefits to be their major source of income.

That's why it's essential you understand these 13 important Social Security terms.

1. Full Retirement Age

Starting at age 62, you become eligible for Social Security benefits. However, you would take reduced benefits if you were to retire anytime before your full retirement age, which for most Americans is now 65 or older.

For example, individuals born in 1960 or later have a full retirement age of 67. If a person with a full retirement age of 67 were to start taking benefits at age 62, she would receive a retirement benefit reduced to 70%. For every month past age 62 that she waits, she earns about 0.4% more in retirement benefits until she reaches a full 100% at age 67.

Depending on your year of birth, your full retirement age ranges from 65 to 67.

2. Delayed Retirement Credits

About 19% of Americans age 65 or older were working during the first quarter of 2016. One possible reason is that working past age 65 to 67 can increase your retirement benefit from 5.5% to 8% per year, depending on your year of birth. For every month past your full retirement age that you wait to start receiving your benefit check, you earn delayed retirement credits that boost your full retirement benefit beyond 100%. Going back to the example of the individual with full retirement at age 67, she would receive a monthly increase of two-thirds of 1% for every month that she delays retirement past age 67.

3. Age 64-3/4

Even though you may decide to wait until or past full retirement age to start taking your benefits, you can still apply for Medicare within three months of age 65 (age 64-3/4) and apply for your retirement or spouse's benefits later.

Medicare Parts A, B, C, and D

People age 65 or older have access to the U.S. health insurance program known as Medicare. This program helps cover health care costs and has several parts.

4. Medicare Part A

This hospital insurance helps pay for inpatient care in a hospital or skilled nursing facility (following a hospital stay), some home health care, and hospice care.

5. Medicare Part B

Medical insurance that helps pay for doctor services and many other medical services and supplies not covered by Part A.

6. Medicare Part C

Also known as Medicare Advantage Plans, Part C plans are offered by private health carriers approved by Medicare and available to Americans enrolled in Part A and Part B with Medicare.

7. Medicare Part D

A drug coverage plan available to everyone with Medicare.

While you have a seven-month window starting age 64-3/4 to sign up for Part A, you don't have to enroll in Part B. Depending on when you enroll for Part B and other factors, your coverage may be delayed and you may have to pay a higher monthly premium unless you qualify for a…

8. Special Enrollment Period (SEP)

Every year has an open enrollment period in which you can enroll in an insurance plan. There are certain life events that qualify you for a Special Enrollment Period. Qualifying events include losing job-based coverage and losing coverage through a family member. For the full list of life events that make you eligible for SEP, visit this section from HealthCare.gov.

9. Social Security Credits

In 2016, you will earn one Social Security work credit for each $1,260 of wages or self-employment income. You can earn up to four of these credits per year. The amount of money required to earn one credit goes up every year. Most Americans need to accumulate 40 credits (about 10 years of work) to qualify for Social Security benefits. However, adults and children may require fewer credits to be eligible for other certain types of Social Security benefits, such as...

10. Disability Benefits

Those who can't work due to a qualifying medical condition that's expected to last at least one year or result in death can receive Social Security Disability Insurance (SSDI) benefits.

Besides meeting the Social Security Administration's definition of disability, you must also have worked long enough and recently enough to qualify for Social Security disability benefits. Unless you're blind or have low vision, you must have earned at least 20 of your required credits in the 10 years before you became disabled to qualify for disability benefits. For example, if you were born after 1929 and became disabled at age 50, you would require at least 28 credits to qualify for Social Security disability benefits.

Certain family members, including your spouse if he or she is age 62 or older or an unmarried child, may qualify for benefits based on your work.

11. Supplemental Security Income Benefits

The Supplemental Security Income (SSI) program pays benefits to disabled adults and children who have limited income and resources. Qualifying recipients of Social Security disability or retirement benefits can receive SSI as long as they meet the requirements. The online Best Eligibility Screening Tool can help you determine whether or not you or your child are eligible for SSI benefits.

12. Back Payments

Given that there are an estimated 74.9 million Baby Boomers (ages 51 to 69) in the U.S., you can expect that Social Security consistently receives a large number of enrollments. The more paperwork, the longer the time to process your application. So, you'll receive back payments from the Social Security Administration for the months between the date that you applied for benefits and the date you were approved for benefits.

There is a mandatory five-month waiting period for SSDI benefits, so back payments only start once the waiting period ends.

13. Retroactive Benefits

Back payments are available for for both SSDI and SSI benefits, but retroactive benefits are only available for SSDI benefits. Retroactive benefits are the monies that you were already eligible for due to your disability onset date but didn't apply for earlier. Keep in mind that you'll receive no interest on any back payments for SSDI or SSI.

This article is from Damian Davila of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Don't Skip These 8 Tax Breaks for Students

Damian Davila — Wed, 09 Mar 2016 10:30:27 +0000

Dear students, I'm sure that you have heard the news: Every single year the average student loan debt per borrower is increasing. For example, the average class of 2015 graduate with student loan debt will owe a little more than $35,000.

Still, there is a silver lining: College students and grads often qualify for significant tax breaks and deductions. To minimize your tax bill and increase your chances of a refund, here are eight tax deductions and breaks worth knowing about.

1. 529 Plans

If your parents or other donor started a 529 plan for you, you're in luck. Also known as qualified tuition programs, 529 plans allow individuals to save for education expenses on a tax-deferred basis and allow a designated beneficiary (ideally, that's you) to use those funds, including interest gains, for qualified expenses free of taxes or penalties.

But few people know that you can also start a 529 plan for yourself. Yes, if you anticipate returning to school for any reason, you can save for related expenses in your own 529 plan — at any age. The list of qualified education expenses goes beyond tuition and academic fees, including expenses for room and board, transportation, equipment, and accommodations for individuals with special needs, so adults can benefit, too. (See also: The 9 Best State 529 College Savings Plans)

2. Qualified IRA Distributions

Qualified distributions taken from a traditional IRA for use in qualified higher education expenses create no tax burden or penalty for you, assuming you only withdraw contributions, and not any earnings on the contributions. (Note: If your spouse, parent, or grandparent takes distributions from their own plans to fund your educational expenses, they would have to pay applicable income taxes on those funds, but don't have to pay the early distribution penalty which applies if under age 59 1/2.)

3. American Opportunity Credit

Replacing the Hope Scholarship credit, the American Opportunity Credit allows you to cover up to $2,500 of undergraduate college costs, including:

100% of your first $2,000 qualified education expenses; and
25% of next $2,000 qualified education expenses.

Keep in mind that you can claim the American Opportunity tax credit on your own academic expenses or on those of your spouse and kids. This means that you can claim up to $2,500 per student living in your household. However, to be eligible for the full credit, your modified adjusted gross income must be $80,000 or less (those making more receive a reduced amount of the credit).

Another advantage of this tax credit is that 40% of it is refundable, meaning that the IRS will issue a refund for that amount even if you don't owe any federal income tax.

4. Lifetime Learning Credit

The Lifetime Learning Credit allows you to deduct up to 20% of your first $10,000 in qualified education expenses, up to $2,000 per taxpayer.

Unlike the American Opportunity Credit, the Lifetime Learning Credit isn't refundable. You can use it to reduce any tax that you owe, but won't receive a refund for the unused portion when your tax bill is already zero.

However, the Lifetime Learning Credit doesn't require you to be working towards a degree like the American Opportunity Credits does. A single class makes you eligible for this tax credit.

To claim the American Opportunity and Lifetime Learning Credits, file Form 8863 with your federal return.

5. Business Deduction for Work-Related Education

The IRS allows you to deduct the costs of qualifying work-related education as business expenses as long as the education is:

Required by employer of by law;
Necessary to maintain or improve skills; or
Indispensable to meet minimum requirements.

You can also deduct qualifying transportation and travel expenses necessary for completing the education. For example, you can deduct 57.5 cents per mile driven and 50% of meals when traveling overnight for education purposes throughout 2015.

Make sure to keep all records, such as transcripts and catalogs of coursework, and receipts from all of your education expenses to provide sufficient support, especially in case of an IRS audit. A best practice is to obtain a statement from your employer providing details about your required education and reimbursements.

For more details, consult Chapter 12 from IRS Publication 970.

6. Coverdell Education Savings Account

Students under age 18, or of any age with special needs, don't pay any tax on distributions from Coverdell Education Saving Accounts for qualified education expenses at eligible institutions.

While there is no limit on the number of Coverdell Education Savings Accounts that can be opened for the same beneficiary, the total cash contribution to all accounts on behalf of the beneficiary cannot exceed a total of $2,000 per year. Contributions can only be made in cash.

7. Education Savings Bond Program

Series EE bonds issued after 1989 and Series I bonds qualify for the Education Savings Bond Program, allowing you to not pay tax on the interest earned on those U.S. savings bonds. While you can take the tax deduction for your own education, you must be at least 24 years old before the bond's issue date.

For additional eligibility criteria, such as modified adjusted gross income tiers, consult Chapter 10 from IRS Publication 970.

8. Scholarship and Fellowship Grants

Last but not least, the IRS exempts students from any taxes on funds from scholarship or fellowship grants that don't exceed qualified education expenses or represent payment for teaching, research, or other services.

To increase the combined value of educational credits and other types of educational assistance, the IRS recommends to coordinate Pell grants and other scholarships by including some or all of the additional assistance in income in the years it's received.

What are other tax deductions and breaks available for students?

This article is from Damian Davila of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: