Full Time Student Tax Question

[workingstudent]

I am in my 30's and going back to college. I also freelance as a web developer. My wife also works full time.

So that's the back story. My question is, is there any tax benefit to being a "full time student"? The government considers a "full time student" someone who is taking 12 or more credit hours a semester, but I don't understand what that means from a tax standpoint. Will it have any effect at all?

Thanks in advance for any thoughts / advice.

[MonkeyMama]

From a tax standpoint, it means nothing. Except maybe in regards to certain tax credits. Full-time college student status is usually important to determine for parents to claim college-aged tax dependents. At age 30, it won't mean anything to you or your taxes. Unless some college deduction or credit requires full-time status. (Off the top of my head, I don't think any do).

[jpg7n16]

Originally Posted by workingstudent

I am in my 30's and going back to college. I also freelance as a web developer to support myself and my family, and that generates a decent income. My wife also works full time, and our combined income is about 120k/yr.

So that's the back story. My question is, is there any tax benefit to being a "full time student"? The government considers a "full time student" someone who is taking 12 or more credit hours a semester, but I don't understand what that means from a tax standpoint. Will it have any effect at all?

Thanks in advance for any thoughts / advice.

Yes, there are a number of tax benefits available to individuals related to higher education expenses.

For instance: Tax Topics - Topic 513 Educational Expenses

The IRS has a full publication that covers the available tax benefits here:
Publication 970 (2010), Tax Benefits for Education (html)
http://www.irs.gov/pub/irs-pdf/p970.pdf (pdf)


Some of the credits do require that you meet certain levels of enrollment, but several of them do not.

For instance, the American Opportunity Credit (Publication 970 (2010), Tax Benefits for Education) requires you to be enrolled at least 'half-time' (among other criteria)

Enrolled at least half-time. A student was enrolled at least half-time if the student was taking at least half the normal full-time work load for his or her course of study.

The standard for what is half of the normal full-time work load is determined by each eligible educational institution. However, the standard may not be lower than any of those established by the U.S. Department of Education under the Higher Education Act of 1965

But for the Lifetime learning credit, you just have to be enrolled as a student at an elligible college:

From: Publication 970 (2010), Tax Benefits for Education
Who Is an Eligible Student
For purposes of the lifetime learning credit, an eligible student is a student who is enrolled in one or more courses at an eligible educational institution

[workingstudent]

@JPG Thanks, great info! Do you think that tax software will catch these things, or will I have to be more proactive about them?

[jpg7n16]

Originally Posted by workingstudent

@JPG Thanks, great info! Do you think that tax software will catch these things, or will I have to be more proactive about them?

I personally use TurboTax online, and I remember having to answer questions about the Educational expenses I had during the year. So I know they cover education expenses in the software.

TurboTax® - Personal Income Taxes, Income Tax Returns, Tax Return, File Taxes Online

Here is some info about what they covered in 2010.

Education Benefits for Tax Year 2010 - TurboTax® Software Support
Education Credits Available for 2010 Tax Filing - TurboTax® Software Support

It couldn't hurt to be proactive and read up on what's available. And if you're afraid the software missed something, you can always doublecheck with another tax preparing firm

From: TurboTax® Deluxe - Get Maximum Tax Deductions, Try for Free, Efile Taxes Online

Maximum (Biggest) Refund Guaranteed or Your Money Back

If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax or SnapTax federal and/or state purchase price paid. TurboTax Online Federal Free Edition customers are entitled to payment of $14.95 and a refund of your state purchase price paid.*

[mcfroggin]

More on education tax credits:
RichAsChocolate.com: Education Tax Deductions

[workingstudent]

Excellent, thanks again JPG and everyone. I was looking at the lifetime learning tax credit, and I'm wondering how that is calculated. They say 20% of up to $10,000, so if hypothetically I spent $10,000, would that be $2000 straight back in my pocket, or is that like a normal deduction where it just decreases my my tax liability by $2000?

Looking at this: Publication 970 (2010), Tax Benefits for Education

[jpg7n16]

Originally Posted by workingstudent

Excellent, thanks again JPG and everyone. I was looking at the lifetime learning tax credit, and I'm wondering how that is calculated. They say 20% of up to $10,000, so if hypothetically I spent $10,000, would that be $2000 straight back in my pocket, or is that like a normal deduction where it just decreases my my tax liability by $2000?

Looking at this: Publication 970 (2010), Tax Benefits for Education

It is a tax credit. Credits are dollar for dollar against your tax liability. Deductions lower your income, and are not dollar for dollar.

So how that specific credit works...

Step 1: Add up all your qualifying expenses (max $10k)
Step 2: Take 20% of that amount

This gets the max credit available to you. You then have to reduce that amount if your household adjusted income is over $100k. (That process is described here: Publication 970 (2010), Tax Benefits for Education)

Earlier you stated that your income was about $120k. But thankfully, it is not based solely on your salary income, but on adjusted income. That means income minus 401k contributions, IRA contributions, student loan interest, etc.

[workingstudent]

Thanks a bunch, that's what I was thinking, but just wanted to make sure I understood the term "credit" properly. That's excellent. I have easily spent 10k in tuition alone (I don't qualify for any scholarships but may get some merit-based ones next year).