Graduate Student Tax Deductions
The tax deductions differ slightly between undergraduate and graduate students. In order to qualify for graduate student tax deductions the student must be taking at least 3 credit hours.
Graduate Student Tax Deductions
There are several different ways that educational expenses can be used as tax deductions to reduce the tax liability of post-secondary school students or their parents. These tax deductions fall into the type generally known as tax relief deductions. Tax relief deductions are not applied equally across the board, but rather they are aimed at lower income tax payers. You will almost always find an income cut off point beyond which the deduction is not allowed.
What this means is that if you are well off enough financially, you can not expect any tax relief from educational expenses. There are also limits to the total amount of the expenses that are eligible for deductions. The exact income cut off points are based on adjusted gross income (AGI) and they do vary from deduction to deduction. The ball park figures are around $50,000 for single tax payers and $100,000 for married filing jointly. The income figures "phase out", which mean that when they reach a certain figure the percentage of expenses that can be claimed as a deduction is gradually reduced until it reaches zero.
The Hope Scholarship Credit is only for the first two years of undergraduate study, so graduate students are not eligible for it. However, the Life Time Learning Credit does apply to graduate students. The Life Time Learning Credit is for tuition and related expenses paid during the school year. The person who claims the student as a personal exemption is the one allowed to take the credit. The credit is up to $2000 per year.
A new deduction for Higher Education Expense allowed up to $4000 in 2006. It applied to graduate as well as undergraduate students. The deduction may be taken by the student themselves, their spouse, or dependents. You can not take this deduction if you are also taking the Hope Scholarship Credit or Life Time Learning Credit. The income limits are higher on this deduction making it ideal for tax payers who exceed the limits for the others.
Graduate students can also get credit for interest paid on their student loans. Although subject to income limits, graduate student tax donations can help reduce your tax liability during a time when every dollar helps. In order to qualify as a graduate student, it is necessary to be enrolled for only 3 credit hours per semester or quarter. This means that even part time students are eligible.