Anchor Intro: Now that college students have returned to campus and those tuition checks have been cashed, will you be getting any tax savings? Odds are you will. Bankrate.com takes a trip to campus to see how smart tomorrow's grads are when it comes to deducting their expenses.
Voice over 1: You don't have to write too many tuition checks to know that college costs a bundle. But at least some of those expenses are deductible, and effectively reduces the cost.
Voice over 2: But does today's students even know what tax breaks they're entitled to? We're going to find out with a simple impromptu quiz. And we'll start with something really easy: Are college expenses even deductible at all?
MOS: "I'm not sure. Maybe."
Voice over 3: Tuition and fees are deductible, up to $4,000. That's just tuition, registration and fees, not books, room and board or other stuff. Now, what are the Hope and Lifetime Learning credits?
MOS: "I do not know. I have not one clue what those are."
Voice over 4: The Hope Credit is a tax credit of up to $1,800 on the first $2,400 of tuition and fees. But you only get it during the first two years of college, and you have to be considered at least a half-time student.
Voice over 5: The Lifetime Learning credit is a credit for 20 percent of qualifying expenses up to $2,000. Unlike the Hope credit, you don't have to be considered half time, and you can take it in any year.
Voice over 6: Now, that was pretty complicated stuff, so let's end with something both simple and important. Which is better: a tax deduction or a tax credit?
MOS: "A tax deduction?"
Voice over 7: A tax deduction reduces the income you're taxed on. A credit reduces the tax you owe. So a credit is normally better.
Standup: So if you're the one writing the checks for that higher education, when tax time rolls around, better study! For Bankrate.com, I'm Kristin Arnold.