There's no easy way to deal with the soaring cost of college tuition, but tax incentives and a little-known loophole can help ease the financial pain, putting thousands of dollars back in the pockets of tuition-paying parents and students.

And with the huge tuition increases seen this year -- in South Carolina, a 15 percent tuition hike at College of Charleston topped the list -- families are looking for relief.

While it's possible to get a full, free ride to college with scholarships and grant aid, most students and parents will be paying some, if not most, of the costs for tuition, room and board, and books and supplies.

It is those out-of-pocket costs that can be partially recouped through tax incentives, credits and deductions.

Some incentives are income-restricted, some conflict with others and there are regulations not detailed here, so make sure you go online and read the fine print, and consider consulting a financial adviser.

Here is a quick overview.

--South Carolina residents can claim an annual state tax income credit for 25 percent of tuition expenses up to $850 a year for a four-year school and $350 for a two-year school.

The credit can be claimed each year, and it's refundable, meaning you can get the money even if you owed no state income tax.

Students must be high school graduates who enrolled in college within 12 months after graduation, and you can't claim the credit if the student is receiving a LIFE scholarship or Palmetto Fellowship. For details visit

--South Carolina residents also can benefit from contributions to the state's Future Scholar 529 plan. The plan is meant to help people to invest money for college, often in a mix of stock and bond funds, and there are no state or federal taxes on the money when it's withdrawn to pay college expenses.

Here's the tax loophole: Contributions to a Future Scholar account are deductible from South Carolina income taxes, even if the money is deposited only briefly.

That means people can open accounts -- "direct" accounts avoid expensive adviser fees -- make tax-deductible contributions and then use the money to pay for tuition, books and even off-campus rent right away. A state tax deduction is worth 7 percent of the amount contributed, and Future Scholar has a "stable capital" account option that limits market risk. Visit for more details.

The federal government offers several tax incentives.

--The American Opportunity tax credit is a stimulus-fortified version of the Hope credit, available for the 2010 tax year.

It's a dollar-for-dollar tax credit on the first $2,000 paid for tuition, books and fees, and a 25 percent tax credit on the next $2,000. That means you can reduce your federal income tax bill by up to $2,500. Income limits apply (families can earn up to $160,000).

--There's also the Lifetime Learning credit, which can be used for part-time higher-education costs and other situations not covered by the American Opportunity credit. Stricter income limits apply for the credit, which is worth up to $2,000.

--If you earn too much to qualify for the tax credits, up to $4,000 in tuition and fees are deductible from federal income.

Visit for information on federal tax credits.

Reach David Slade at 937-5552 or