If you have a student loan for the child, you can deduct up to $2,500 in interest paid as long as your adjusted gross income is under $80,000 ($160,000 if married and filing jointly). You don’t need to itemize to get this deduction.
Two education credits — the American Opportunity Tax Credit and the Lifetime Learning Credit — are also available even if you do not itemize, although you cannot use both in the same tax year and they phase out at higher incomes. A variety of college costs — i.e., tuition, books and supplies — count toward the credit.
However, there are different limitations that apply to both, and your individual situation can determine which one makes sense to use.
It’s worth noting that beginning in tax year 2018, student-loan debt forgiveness due to death or permanent and total disability will be excludable from income.
Also, when you do tax planning, remember that contributions to 529 education savings plans can be tax-deductible at the state level. These funds offer tax-free growth on investments and tax-free withdrawals for qualified education costs.
More from Personal Finance:
If you’re close to retirement, here’s where to hide from market volatility
These new rules will help protect older Americans from financial fraud
States where you’ll pay the most, least in retirement taxes