The Tax Tutorial for Physician Assistant Students
If you were a physician assistant student in 2016, chances are that finances are pretty tight. Your ability to earn an income is limited by the time spent on your education. Not to mention, tuition and other costs associated with going back to school quickly mount. Fortunately for physician assistant students, there are a few ways to recoup some of these losses this tax season. So, get your accounting savvy on and don't forget to consider these tax breaks for PA students before you file with Uncle Sam.
If you were enrolled in a physician assistant program in 2016, congrats! You may have a tax credit coming your way. There are two awards physician assistant students may be able to claim - the American Opportunity Tax Credit and the Lifetime Learning Credit. Tax credits directly reduce the amount you owe on your taxes and, if the credit amounts to more than what you owe, you receive the remainder as a tax refund.
The American Opportunity Tax Credit
The American Opportunity Tax Credit awards a maximum of $2,500 annually to qualifying students enrolled in higher education programs. To qualify, physician assistant students must have been enrolled in a graduate program on at least a part-time basis during the tax year. The credit may be awarded annually for each of the first four years of higher education. To be eligible for the full credit, the PA student must also have an adjusted gross income of less than $80,000 ($160,000 or less for married couples filing jointly).
The Lifetime Learning Credit is designed to help finance both undergraduate and graduate education. Eligible physician assistant students may receive a tax credit of up to $2,000 annually toward the cost of their education. Unlike the American Opportunity Tax Credit, there is no limit on the number of years this credit may be claimed. To be eligible for the Lifetime Learning Credit, the physician assistant student's modified adjusted gross income must be less than $52,000 ($104,000 or less for married couples filing jointly).
Unlike tax credits, which directly reduce the amount you pay in taxes, deductions decrease the amount of your income subject to taxes. Claiming deductions reduces overall tax liability. Given the cost of physician assistant education, PA students stand to claim several deductions related to their education.
Tuition and Fees Deduction
Physician assistant students may reduce taxable income up to $4,000 by claiming a tuition and fees deduction. To claim the deduction, the PA student must have an adjusted gross income of less than $80,000 (less than $160,000 for married couples filing jointly).
Student Loan Interest Deduction
While most forms of interest are not deductible on your tax return, interest paid towards educational loans may be treated differently. Individuals with a modified adjusted gross income of less than $75,000 (less than $150,000 for married couples filing jointly), can reduce taxable income by up to $2,500 for interest paid on qulifying student loans.
Educational Expense Deduction
Physician assistant students know all too well that tuition is not the only cost associated with graduate education. Fortunately, education expenses outside of tuition may also be deducted from taxable income. These items may include the cost of books, school supplies and other required equipment. Use caution when claiming educational expense deductions. In most cases, specific conditions must be met for the expense to qualify. Save receipts for such expenses as a reminder of your deduction come tax time, and for proof of the expense should it be called into question.
Overall, there are several ways that physician assistant student status can benefit you come tax time. Between tax credits and deductions, you stand to reduce the amount you owe this year by thousands of dollars. In most cases, it's with getting an expert opinion to make sure you don't leave money on the table. Hiring a CPA to help out as you file taxes this year will be well worth the expense - even on a student budget.
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