Tax Breaks for Students in Missouri
Students in Missouri and parents of dependent students attending a college in Missouri can take advantage of a few federal and state tax breaks associated with paying for higher education. These tax deductions and tax credits can reduce the filer's tax liability and free up more income to pay college bills.
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Federal Tax Credits
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The biggest tax benefit available to students in Missouri comes from the federal government. The American Opportunity Credit provides up to $2,500, part of which is refundable, for people who pay undergraduate tuition. Another option, the Lifetime Learning Credit, provides up to $2,000 for paying any student's tuition. To receive these credits, you must file Form 8863 with your federal tax return.
Federal Tax Deductions
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A student who does not claim a tax credit might be able to take the tuition and fees tax deduction on his federal tax return. This deduction is for up to $4,000 of tuition and fees paid. After graduating, Missouri students who took out loans have another tax deduction available. The student interest deduction allows taxpayers to subtract up to $2,500 of interest paid on student loans from their taxable income.
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Missouri 529 Plan
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An individual who contributes to a 529 college savings plan with a student listed as the beneficiary can take a tax deduction on Missouri state taxes. The deduction is for the amount of the contribution, up to $16,000 per year for couples filing jointly or $8,000 for individuals. Students do not have to pay taxes on the money when they withdraw it and use it for college tuition.
Non-Resident Students
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Students who pay state taxes in Missouri but are charged the non-resident price for tuition at a Missouri university can sometime take a tax offset credit at the university. Missouri University of Science and Technology is one school that offers this benefit. The tax offset credit reduces the student's tuition bill by the amount of state tax paid, dollar for dollar. The student should submit copies of his Missouri tax return and W-2 forms showing Missouri income to the university to receive the credit.
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