Deduct student loan interest

If you are paying qualified student loans, you may be able to deduct up to $1,500 of interest on the loans in 1999. This above-the-line deduction increases gradually to $3,500 in 2001 and is phased out as your income increases.

Maximize new education incentives, credits and deductions.

You may be eligible to claim the Hope Credit or Lifetime Learning Credit:

• Hope Credit. If you, your spouse or your dependent is enrolled in a post-secondary educational program that leads to a degree or certificate, you may be able to claim a nonrefundable Hope Credit for the first two years of education. For qualified tuition and related expenses required for enrollment on at least a half-time basis, the maximum credit allowed is $1,500 per student per year. This maximum will be indexed for inflation after 2001.
  
• Lifetime Learning Credit. If you, your spouse or your dependent is a student, you may be eligible for the nonrefundable Lifetime Learning Credit of up to $1,000 (20% of the first $5,000 of qualified tuition and expenses). The credit is allowed for an unlimited number of years on a per-taxpayer rather than a per student basis. Unlike the Hope Credit, the Lifetime Learning Credit covers all four years of post-secondary education, as well as graduate school and courses to improve job skills. You cannot claim this credit in addition to the Hope Credit. Furthermore, if you claim either the Hope or Lifetime Learning Credit in a given year, distributions from your Education IRAs will not be tax-free.