Education Tax Breaks

There is no argument that one of the biggest expenses facing most of us is how to finance an education for our children. For the vast majority of us that fall somewhere between the super-wealthy and the poverty level, a major incentive that influences and determines our education investment choices are the tax breaks available for specific education investments and expenses. Let's explore the different options available and their interaction with each other, as well as with other investments and financial aid.

The most popular education specific investments available today share one common trait: They offer tax breaks when you use them to invest for education. You can't have a complete discussion of Coverdell Education Savings Accounts, state savings plans, or education savings bonds without including their tax break benefits. As a matter of fact, the tax savings are the biggest selling point of these education investments. However, there is also a different category made up of tax deductions and credits that are not tied to investments, but are available for education expenses. You may be entitled to the following deductions and/or credits:

• college expenses deduction
• student loan interest deduction
• Hope scholarship credit
• Lifetime Learning credit

For more information on education tax breaks, consult IRS Publication 970, Tax Benefits For Education, available at the IRS web site.