Education incentives. Beginning in 1998, a number of tax benefits are available to families who are saving for or paying higher education costs or who are repaying student loans. These benefits are identified here with references to where you can find more detailed information.

1. Education credits. For qualified tuition and related expenses, you may be able to claim a Hope credit or a lifetime learning credit. See chapter 36.
2. Student loans. For payments due and paid after 1997, you may be able to deduct interest you pay on a qualified student loan. See Publication 970, Tax Benefits for Higher Education. And, if a student loan is canceled, you may not have to include the canceled debt in income. See chapter 13.
3. Education IRA. You may be able to contribute to an education IRA for a child under age 18. See chapter 18.
4. Withdrawals from IRAs for education. You can make penalty-free withdrawals from your traditional or Roth IRA if you pay for qualified higher education expenses. See chapter 18.

You cannot claim more than one type of tax benefit for the same expense. If you use all or part of your qualifying educational expenses as the basis for any of the new benefits, you must reduce the amount of your qualifying educational expenses when computing your educational expense deduction.

Standard mileage rate. Generally, if you used your car for transportation to school, you can deduct 32 1/2 cents per mile. Beginning in 1998, you can use this standard mileage rate for a car you lease, as well as a car you own. See Using your car under What Educational Expenses Are Deductible?

Limit on itemized deductions. If your adjusted gross income is more than $124,500 ($62,250 if you are married filing separately), your itemized deductions may be limited. See chapter 22 if you need more information about this limit.

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