Study up for tax season: Don't miss out on expanded tax benefits of education

Monday, March 28, 2011 8:08 am EDT



Public Company Information:


In the annual rush to complete tax forms by the IRS deadline, don’t forget to claim the tax benefits of college, says Sallie Mae, the nation’s No. 1 financial services company specializing in education. Taxpayers who paid college tuition or interest on student loans in 2010 may be eligible to take advantage of tax savings.

A national study conducted by Sallie Mae and Gallup found that 43 percent of families of undergraduate students surveyed in 2010 claimed tax benefits for education. According to a 2010 study by College Board, Americans claimed education tax credits and deductions worth an estimated $7.7 billion in savings.

Sallie Mae recommends college students, parents of dependent students and student loan customers investigate these tax credits and deductions for higher education:

The American Opportunity Tax Credit, a newly expanded tax credit available again this year, increases the maximum Hope Credit from $1,800 to $2,500 and allows the credit to be claimed for the first four years of undergraduate study instead of only the first two. Single taxpayers with modified adjusted gross incomes under $90,000 may qualify for at least a partial credit, as may married couples filing jointly with modified adjusted gross incomes below $180,000.

Additionally, lower-income taxpayers who do not owe 2010 taxes may also benefit. Because this credit is partially “refundable,” they may qualify for a payment from the federal government of up to $1,000. Current college students and parents take note: Congress recently passed legislation to extend the availability of the American Opportunity Tax Credit through 2012.

The Lifetime Learning Tax Credit provides a tax credit of up to $2,000 per taxpayer for qualified higher education expenses. Students in any year of college or graduate school or taking continuing education courses may be eligible.

The Student Loan Interest Tax Deduction allows a taxpayer to deduct up to $2,500 for interest paid on qualified federal or private higher education loans.

The Tuition and Fees Tax Deduction allows a taxpayer to deduct as much as $4,000 for qualified tuition expenses and related fees.

529 College Savings Plans are tax-advantaged programs created to help families save for a child's future education expenses. Contributions may be used to pay for qualified higher education expenses, such as tuition, certain room and board costs, books, and required equipment. In addition, many states offer taxpayers deductions or credits for contributions into their 529 plan accounts.

While taxpayers are encouraged to consult their tax advisor for individual tax guidance, Sallie Mae offers students and families these general tips:

Earn rewards for purchases of tax software or tax preparation services. Members of Upromise by Sallie Mae, a program that helps students and families save money for education expenses, can receive 6 percent cash back when they file taxes online with TurboTax or 8 percent when filing their taxes online with H&R Block. Visit for more information. Upromise is free to join.

E-file for free. Simple federal tax returns may be e-filed at no cost by using TurboTax Federal Free Edition. More information is available through Sallie Mae’s tax center at

Understand the income limits and restrictions on how education tax credits and deductions can be combined. For example, the Tuition and Fees Deduction cannot be combined with the Lifetime Learning Tax Credit, but the Student Loan Interest Deduction can be used in combination with other education-related benefits. IRS Publication 970, “Tax Benefits for Education,” available at, provides full details.

Gather the right supporting documents. To calculate the Student Loan Interest Deduction, taxpayers need to obtain IRS Form 1098-E from their loan servicer. Sallie Mae customers may download their form securely at Anyone claiming one of the credits or the Tuition and Fees Deduction will need IRS Form 1098-T from their college or university.

Sallie Mae (NASDAQ: SLM) is the nation’s No. 1 financial services company specializing in education. Celebrating 40 years of making a difference, Sallie Mae continues to turn education dreams into reality for American families, today serving 25 million customers. With products and services that include 529 college savings plans, Upromise rewards, scholarship search and planning tools, education loans, insurance, and online banking, Sallie Mae offers solutions that help families save, plan, and pay for college. Sallie Mae also provides financial services to hundreds of college campuses as well as to federal and state governments. Learn more at Commonly known as Sallie Mae, SLM Corporation and its subsidiaries are not sponsored by or agencies of the United States of America.


Patricia Nash Christel (302) 283-4076
Amanda Holt 703-984-6102