Discover How to Keep More of What You Make

The tax law contains many incentives to encourage saving and paying for attending school. If you can take advantage of them, you are in effect receiving a government subsidy that lowers the cost of education. These include:

• Tax-free treatment of certain scholarships and grants and interest on U.S. savings bonds redeemed for education purposes
• Tax deferral of earnings on contributions to qualified tuition (Section 529) plans and tax-free treatment for disbursements to cover qualified education expenses
• American Opportunity Credit (formerly the Hope Credit) and Lifetime Learning tax credits to pay college costs
• Tax-sheltered savings in Coverdell education savings accounts used to pay any level of education
• Deduction for tuition and fees
• Deduction for interest on student loans
• Deduction for work-related education expenses
  

Each break may set limits on who qualifies, based on marital status and adjusted gross income in the current year. Several of the breaks must be coordinated so you don't gain multiple write-offs with respect to the same education expenses.

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