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Some bigger tax breaks for college students and their families The student loan interest deduction is unchanged in 2004, but the deduction for qualified college expenses is bigger. How the interest deduction works: Up to $2,500 in student loan interest paid in 2004 can be deducted on 2004 returns. This is unchanged from 2003. You can claim the deduction indefinitely. Under the law in place before 2003, you could only claim the deduction for the first 60 months after you were required to start making payments. The deduction can be claimed regardless of whether you itemize your deductions on Schedule A. But eligibility has been expanded so more taxpayers can use the deduction. If youre married filing jointly, you can deduct all $2,500 if your adjusted gross income (AGI) is $100,000 or less. It phases out between $100,000 and $130,000. For other filers, you get the full deduction if you earn $50,000 or less. The deduction phases out between $50,000 and $65,000 Deducting qualified expenses You can deduct up to $4,000 in qualified expenses in 2004. That is an increase from $3,000 in 2003. You can qualify for the deduction if your AGI is $130,000 or less (for couples filing jointly) or under $65,000 for singles. If your AGI is between $65,000 and $80,000 for singles or $130,000 to $160,000 for married couples, the deduction drops to $2,000. You can not claim the deduction if your AGI is greater than $80,000 for singles or $160,000 for married couples filing jointly. Don't try to use the Hope or Lifetime credits, too Sorry, but you can NOT claim both this deduction and the Hope and Lifetime Learning credits for one student in the same year. For more information, see IRS Publication 970 |
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