Tax Deductions for Parents of College Students to Save Money

The increasing cost of college has given rise to a huge projection in college debt. Plenty of parents, students, and guardians want a pause from these expenses.

Luckily, the US government provides a variety of tax breaks for college students or parents through tax credits, tuition, and fees deduction, and tax-free savings account.

To understand how you might take advantage of these tax deductions and reduce the amount of education tax credits as a college student or recent graduate, we've gathered 7 tax deductions and credits you should know to save the most money on your bill for the tax year.

Retirement Account Contributions (IRA)

It might seem odd to start with retirement when you’re just starting on your career journey or only have a weekend job, but this is a valuable tax deduction for students in the long run.

Capital Gain Losses

When you choose to sell your losing positions, you can harvest these tax losses to lower your taxable income. Each year, you can offset your capital gains with capital losses and claim up to $3,000 in losses against your earned income.

American Opportunity Tax Credit

This credit can be worth up to $2,500 per year for four years of schooling after high school if enrolled at least half-time and working towards a degree.

Lifetime Learning Credit

Closely related to the American Opportunity tax credit, this one also lowers your tax bill on a dollar-for-dollar basis, but only one can be claimed.

Recovery Rebate Tax Credit

If you aren't claimed as a dependent on someone’s tax return in 2020, and you didn't receive a check, you could claim the Recovery Rebate Tax Credit on your return.

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