college tax credit

Uncle Sam May Provide Relief from College Costs on Your Tax Return

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We all know the cost of college is expensive. The latest figures from the College Board show that the average annual cost of tuition and fees was $10,230 for in-state students at public four-year universities — and $35,830 for students at private not-for-profit four-year institutions. These amounts don’t include room and board, books, supplies, transportation and other expenses that a student may incur.

Two tax credits

Fortunately, the federal government offers two sizable tax credits for higher education costs that you may be able to claim:

  1. The American Opportunity credit. This tax break generally provides the biggest benefit to most taxpayers. The American Opportunity credit provides a maximum benefit of $2,500. That is, you may qualify for a credit equal to 100% of the first $2,000 of expenses for the year and 25% of the next $2,000 of expenses. It applies only to the first four years of post-secondary education and is available only to students who attend at least half time.

Basically, tuition, course materials and fees qualify for this credit. The credit is per eligible student and is subject to phaseouts based on modified adjusted gross income (MAGI). For 2019, the MAGI […]

By |September 17th, 2019|college tax credit|0 Comments

Expanded Use of 529 Account Funds

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Under pre-Act law, funds in a Code Sec. 529 college savings account could only be used for qualified higher education expenses. If funds were withdrawn from the account for other purposes, each withdrawal was treated as containing a pro-rate portion of earnings and principal. The earnings portion of a non-qualified withdrawal was taxable as ordinary income and subject to a 10% additional tax unless an exception applied.

“Qualified higher education expenses” included tuition, fees, books, supplies, and required equipment, as well as reasonable room and board if the student was enrolled at least half-time. Eligible schools included colleges, universities, vocational schools, or other post-secondary schools eligible to participate in a student aid program of the Department of Education. This included nearly all accredited public, nonprofit, and proprietary (for-profit) post-secondary institutions.

New law. For distributions after Dec. 31, 2017, “qualified higher education expenses” include tuition at an elementary or secondary public, private, or religious school, up to a $10,000 limit per tax year. (Code Sec. 529(c) (7), as added by Act Sec. 11032(a))

By |January 12th, 2018|college tax credit, education credit, New Tax Laws|0 Comments

College Tax Credit Reminder

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The IRS recently reminded taxpayers that back-to-school time is a good time to see if they qualify for education-related tax credits. The American Opportunity Credit (AOC) and Lifetime Learning Credit (LLC) are available to taxpayers who pay qualifying expenses for eligible students. The maximum AOC is $2,500 per student, 40% refundable, and available for the first four years of postsecondary education. The LLC is limited to $2,000 per tax return, nonrefundable, and available to both graduate and undergraduate students. Only one credit can be claimed for a particular student in a tax year.

By |October 6th, 2014|college tax credit, credit, tax credit|0 Comments