Often overlooked, federal and state tax breaks can significantly reduce the overall cost of going to college for New York college-bound students and their families. The New York State Higher Education Services Corporation (HESC) reminds tax payers to make sure they are claiming all the higher education tax credits or deductions for which they are entitled.

A college education is more valuable today than ever, but attending college can be expensive. Tax payers who are sending their sons and daughters to college can realize significant savings on tuition and other qualified college expenses – as much as a $2,500 credit on federal taxes and up to a $400 credit or a maximum $10,000 tax deduction on New York State taxes.

Details about higher education tax benefits can be found on HESC.ny.gov.

The American Opportunity Credit, just renewed last year, applies for tax years 2012 through 2017. Taxpayers can receive a tax credit of up to $2,500 per student for $4,000 or more of qualified higher educational expenses. Even if you don’t owe any tax, you can get a refund of up to 40 percent of the credit, up to $1,000 to help offset college expenses.

Qualified taxpayers who have exhausted the American Opportunity Credit, may be able to claim a non-refundable Lifetime Learning Credit of up to $2,000 for qualified education expenses paid for all eligible students, including graduate students. There is no limit on the number of years the lifetime learning credit can be claimed.

New York taxpayers can take either a tax credit or a tax deduction for allowable undergraduate college tuition, less the amount of scholarships and other financial aid that does not need to be repaid. A tax credit reduces the amount of tax you pay; a deduction lowers your taxable income. A tax credit of up to $400 per student is available, even if you don’t owe any taxes. A maximum deduction of $10,000 may be taken for each eligible student and may offer you a greater tax savings if you itemized deductions on your federal form. Worksheets available at the New York State Department of Tax and Finance can help you determine which works better for you.

Some or all college qualified expenses will be recorded on Form 1098-T sent by the college. Qualified expenses for federal purposes generally include tuition, required fees, books, supplies and equipment. Remember to save receipts for books and supplies purchases, as these won’t be included on the form. Only qualified tuition expenses may be used for the New York State tax credit or deduction. Consult your tax professional for additional guidance.

Student loan borrowers may also benefit from a federal tax deduction. The Federal Student Loan Interest Deduction provides up to a $2,500 tax deduction for the interest paid during repayment on qualified student loans. If you paid more than $600 or more of interest on a qualified student loan in 2013, your lender will automatically send you a Form 1098-E, a statement of student loan interest paid.

Make your college expenses and student loans more affordable by including these valuable tax incentives when you file your federal and New York State taxes this year.

About HESC: HESC is New York State’s student financial aid agency that helps people pay for college and a national leader in providing need based grant and scholarship award money to college-going students. At HESC’s core are programs like the Tuition Assistance Program (TAP), numerous state scholarships, federal college access grants and a highly successful College Savings program. HESC puts college within the reach of hundreds of thousands of New Yorkers each year through programs like these and through the guidance it provides to students, families and counselors. In 2012-13, HESC helped more than 342,000 students achieve their college dreams by providing more than $979.4 million in grants, scholarships and loan forgiveness benefits, including $931 million awarded through the Tuition Assistance Program (TAP).