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11 Opportunities to Slash College Bills with Education Tax Benefits

11 Opportunities to Slash College Bills Education Tax Benefits via College Tax WWhiz powered by TAXACT What is a Credit? A tax credit reduces the amount of income tax you may have to pay. What is a Deduction? A deduction reduces the amount of your income that is subject to tax, thus generally reducing the amount of tax you may have to pay. %24 Credits Deductions Savings Accounts Scholarships American Opportunity Credit Worth up to The American Opportunity Credit is worth up to $2,500 for tuition, fees and course materials per student for the first four years of postsecondary 2,500 4. $4 education. for the first Even if you don't owe any tax, you can get up to 40 percent as a refund. It phases out at higher incomes. years Lifetime Learning Credit The Lifetime Learning Credit helps parents and students pay for post-secondary education. Claim up to 2,000 For the tax year, you may be able to claim a lifetime learning credit of up to $2,000 for qualified education expenses paid for all students enrolled in eligible educational institutions. Student Loan Interest Deduction You may be able to deduct interest you pay on a qualified student loan. Generally, the amount you may deduct is the lesser of $2,500 or the amount of interest you actually paid. Amount is lesser of 2,500 ORinterest paid The deduction is claimed as an adjustmer income so you do not need to itemize your deductions on Form 1040, Schedule A Business Deduction for Work Related Education If you are an employee and can itemize your Expenses greater than deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. of your adjusted gross income Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses is greater than 2% of your adjusted gross income. Tuition and Fees Deduction You may be able to deduct qualified education expenses paid during the year for yourself, your spouse or your dependent. Reduce amount of your income subject to tax by up to 4,000 The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000 Coverdell Education Savings Account (ESA) Total contributions cannot be more than A Coverdell ESA can be used to pay a student's eligible K-12 expenses, as well as post-secondary expenses. On the other hand, income limits apply to contributors, and the total contributions for the beneficiary of this account cannot be more than $2,000 in any year. 2,000 Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed. 529 Plans - Qualified Tuition Programs (QTP) QTP allows taxpayers to either prepay or contribute to an account for paying a student's qualified higher education expenses. Distributions are Tax FREE 529 plan distributions are tax-free as long as they are used to pay qualified higher education expenses for a designated beneficiary. Qualified expenses include tuition, required fees, books and supplies. For someone who is at least a half-time student, room and board also qualify. Education Exception to Additional Tax on Early IRA Distributions Take Distributions Generally, if you take a distribution from your IRA before you reach age 59½, you must pay a 10% additional tax on the early distribution. from your IRA's However, you can take distributions from your IRAS for qualified higher education expenses without having to pay the 10% additional tax. You may owe income tax on at least part of the amount distributed, but you may not have to pay the 10% additional tax. With out paying 10% additional tax Education Savings Bond Program Generally, you must pay tax on the interest eamed on U.S. savings bonds. However, when you cash in certain savings bonds under an education savings bond program, you may be able to exclude the interest from income if you meet the following condition: Cash in savings bonds Exclude Interest from your income You pay qualified education expenses for yourself, your spouse, or a dependent for whom you claim an exemption on your return. Scholarships, Fellowships, Grants and Tuition Reductions A scholarship or fellowship is tax free only if you meet the following conditions: Tax FREE • You are a candidate for a degree at an eligible educational institution. • You use the scholarship or fellowship to pay qualified education expenses. Employer-Provided Educational Assistance If you receive educational assistance benefits from your employer under an educational assistance program, you can exclude up to $5.250 of those benefits each year. Exclude up to 5,250 of educational assistance benefits each year This means your employer should not include the benefits with your wages, tips, and other compensation shown in box 1 of your Form W-2. For more information visit College Tax Whiz powered by TAXACT Sources: TAXACT It's how we ACT

11 Opportunities to Slash College Bills with Education Tax Benefits

shared by EricUngs on Feb 14
Other than buying a home, a college education is one of the biggest investments Americans typically make. College costs are on the rise making student loan debt at an all time high - $870 Billion. ...




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