Comparing College Savings Options. Deducting Education Loan Interest.
Education Tax Credits
Two education tax credits are available:
(1) American opportunity credit and (2) lifetime learning credit. Each year, a taxpayer can claim either, but not both, for a particular student. A taxpayer may claim one type of credit for one student and the other credit for a different student. If available, the American opportunity credit generally is the more generous of the two credits
Deducting Education Loan Interest
Interest paid on indebtedness incurred by the taxpayer to pay for the qualified higher educational expenses of the taxpayer, spouse or dependent may be deductible above-the-line.
• Cannot be claimed by an individual claimed as a dependent.
• Annual maximum deduction is $2,500.
