I was told that there are tax breaks for people studying for advanced degrees. Do you have more information about this?
-Anonymous, Via the Internet
The short answer is: Yes, there are education tax credits as well as tax deductions. But, before you go back to school, make sure you factor in how much your education will cost with how much your income is likely to increase.
The Hope credit allows you to claim up to $1,650 for qualified postsecondary education expenses, including tuition, fees, books, and supplies. This credit is available only during the first two years of postsecondary education. Consult Tax Form 8863. The Lifetime Learning credit, which has fewer restrictions than the Hope credit, allows eligible taxpayers to claim up to $2,000 for qualified education expenses.
If you are making less than $65,000, you might be able to deduct up to $2,500 of the interest you pay each year on your current student loans, which reduces your taxable income. See IRS Publication 970, Tax Benefits for Education.
Make sure you find out what’s available to you at your company. You may be able to deduct some of the costs of work-related education as business expenses.