2012 Tax Deductions for Students is really an interesting area.

These days due to recession time in the economy, everyone is going for extending their resume by getting into higher education so as to get better jobs. So, in 2012 Students can certainly take a tax benefit out of that expense, whether it be interest on student loan, expenses on education. Various options for claiming a tax deduction or taking a student tax credit are listed below:

2012 Student loan interest - (including the interest paid by your parents)

As a taxpayer, you can deduct all student loan interest for student loans taken out in your own name. There is one very important point that you might need to consider. Most students don’t realize they can also tax deduct the interest on loans their parents take out for their child’s education—even if you’re not claimed as a dependent. That’s because the IRS treats the interest as though it was given to you, then paid by you to the loan.  You can deduct up to $2,500 in student loan interest paid by your parents in this way.

Tuition, fees, books, supplies and equipment

In 2012 Tax deductions, this can include quite a few student expenses like textbooks, computers, Internet connections, pens and pencils, and anything else you need to go to school or get access to online classes. So don't forget to claim these in 2012 student tax deductions 

Various Tax credits for education:

There are several different types of credit programs that the federal government is offering to lessen the burden on students and promote more & more education. Basically, all of them more or less allow you to deduct the same things, but with different amount limits and conditions. Before that I would like to explain a little bit about the difference between a tax deduction for students & a tax credit. A tax deduction allows you to deduct a certain expense from your income & then on the residue,i.e balance the tax rate is applied & tax is calculated.In the case of a tax credit, it is directly deducted from your calculated amount of TAX, not from your income. Now, coming back to the tax CREDITS.These can include:

The American Opportunity Tax Credit

This is a tax credit, not a deduction—so you can reduce your tax bill dollar-for-dollar for everything you spend on tuition, fees, books supplies and equipment in the first 4 years of study. It applies to the 2009 and 2010 tax years only, and is a replacement for the Hope credit—with more generous terms—authorized as part of the economic stimulus bill.

A very important thing about a tax credit is that even if you have no income and owe no income tax, you can still get the credit—so the IRS might send you a check(yippee!!).  In 2012 You can get up to $2,500 under this credit and up to $1,000 refunded if you owe no income tax. The amount you qualify for varies depending on how much you make ($90,000 modified adjusted gross income for singles and $180,000 per couples). You must have been enrolled at least part-time in 2009 in an accredited degree, certificate or program leading to a recognized credential.

The Hope Credit

The Hope credit allows you to deduct for the same things i.e education costs like tuition, fees, equipment and books—up to $3,600 per student—for the first two years of undergraduate study. It also includes a room and board allowance.  But you can deduct only expenses required to be paid to the school for equipment—so if you buy a computer on your own, it’s not included. The tax credit is also nonrefundable(unlike the American Opportunity Tax Credit)—the most you can get is limited to the amount of taxes you owe. This credit is meant to be replaced by the American Opportunity Tax Credit for the 2009 and 2010 tax year, so you can’t apply for both—unless(an exception) you happen to be attending a school located in a Midwestern disaster relief area. In that case, you may qualify for both.

By the way, click on the link if you want to know the best way to claim 2012 Tax Deductions for students

2012 Lifetime Learning Tax Credit

This is different from the above two tax credits, in that you can apply for all kinds of post secondary education—not just undergraduate. It’s designed to be used when you’ve already exhausted your eligible options for the other two credit programs, which provide slightly more advantageous terms. Under this program you can claim up to $2,000 tax deduction per tax return, not per student, up to $4,000 total. It’s nonrefundable—so you only get back in proportion to what you pay in taxes. You can deduct tuition, fees, and amounts the school itself requires you to pay for books, supplies and equipment—so anything you spend on your own for these things isn’t eligible.
You don’t have to pursue a degree to get this credit—you can use it for continuing education—and you can use it for all years of post secondary education.

Child care

This is just for your information, in case you’re a parent who puts your kids in child care while you go to school (or while you go to work or anywhere else, for that matter), you can claim a credit for the amount you spend on child care. A tax credit is different from a tax deduction because it lowers your tax bill dollar-for-dollar, rather than reducing your 2012 income and thus reducing your tax bill only by a percentage of what the child care actually costs.

You can also claim a credit for up to $5,000 in child care expenses spent through a reimbursement account at work—plus an additional $1,000 for expenses you had to pay in excess of what’s reimbursed, for the care of two children or more.

If you want to know a simple way to claim 2012 tax deductions for students, click on this link and check my recommended tax return method.