college tax credit - Linkenheimer LLP CPAs & Advisors

Investing In The Future With A 529 Education Plan

If you have a child or grandchild who’s going to attend college in the future, you’ve probably heard about qualified tuition programs, also known as 529 plans. These plans, named for the Internal Revenue Code section that provides for them, allow prepayment of higher education costs on a tax-favored basis.

There are two types of programs:

Prepaid plans, which allow you to buy tuition credits or certificates at present tuition rates, even though the beneficiary (child) won’t be starting college for some time; and
Savings plans, which depend on the investment performance of the fund(s) you place your contributions in.

You don’t get a federal income tax deduction for a contribution, but the earnings on the account aren’t taxed while the funds are in the program. (Contributors are eligible for state tax deductions in some states.) You can change the beneficiary or roll over the funds in the program to another plan for the same or a different beneficiary without income tax consequences.

Distributions from the program are tax-free up to the amount of the student’s “qualified higher education expenses.” These include tuition (including up to $10,000 in tuition for an elementary or secondary public, […]

By Linkenheimer LLP|2022-10-04T19:42:14+00:00October 4th, 2022|child, college tax credit, education credit|0 Comments

California Tax Updates for 10/28

Update 1:

Required supplemental paid sick leave (SPSL) related to COVID-19 expired in California on Sept. 30, 2021. Specifically, that leave was required of employers with at least 26 employees. However, a number of CA localities continue to require some form of SPSL. They include Long Beach (for employers with at least 500 employees); Los Angeles city and county (also for employers with 500 or more employees); and Oakland (for employers of 50 or more workers). Sonoma County has a pending extension to a prior law.

Update 2:

California’s 529 college savings plan conforms to recent changes in the federal tax law. Those changes expanded allowable withdrawals from 529 plans to include expenses associated with participation in a registered apprenticeship program and student loan repayment, for taxable years beginning Jan. 1, 2021 or after. Also, for the same period, CA legislation disallows the deduction available on qualified education loan interest to the extent such interest is paid as a tax-free distribution from a […]

By Linkenheimer LLP|2021-10-28T17:25:37+00:00October 28th, 2021|ca, CA tax, california, college tax credit|0 Comments

Tax-Favored Ways to Build up a College Fund

If you’re a parent with a college-bound child, you may be concerned about being able to fund future tuition and other higher education costs. You want to take maximum advantage of tax benefits to minimize your expenses. Here are some possible options.

Savings bonds

Series EE U.S. savings bonds offer two tax-saving opportunities for eligible families when used to finance college:

You don’t have to report the interest on the bonds for federal tax purposes until the bonds are cashed in, and
Interest on “qualified” Series EE (and Series I) bonds may be exempt from federal tax if the bond proceeds are used for qualified education expenses.

To qualify for the tax exemption for college use, you must purchase the bonds in your name (not the child’s) or jointly with your spouse. The proceeds must be used for tuition, fees and certain other expenses — not room and board. If only part of the proceeds is used for qualified expenses, only that part of the interest is exempt.

The exemption is phased out if your adjusted gross income (AGI) exceeds certain amounts.

529 plans

A qualified tuition program (also known as a 529 plan) allows you to buy […]

By Linkenheimer LLP|2021-06-30T19:54:28+00:00June 30th, 2021|college tax credit, credit, education credit, tax credit|0 Comments

Back-To-School Tax Breaks On The Books

Despite the COVID-19 pandemic, students are going back to school this fall, either remotely, in-person or under a hybrid schedule. In any event, parents may be eligible for certain tax breaks to help defray the cost of education.

Here is a summary of some of the tax breaks available for education.

1. Higher education tax credits. Generally, you may be able to claim either one of two tax credits for higher education expenses — but not both.

With the American Opportunity Tax Credit (AOTC), you can save a maximum of $2,500 from your tax bill for each full-time college or grad school student. This applies to qualified expenses including tuition, room and board, books and computer equipment and other supplies. But the credit is phased out for moderate-to-upper income taxpayers. No credit is allowed if your modified adjusted gross income (MAGI) is over $90,000 ($180,000 for joint filers).
The Lifetime Learning Credit (LLC) is similar to the AOTC, but there are a few important distinctions. In this case, the maximum credit is $2,000 instead of $2,500. Furthermore, this is the […]

By Linkenheimer LLP|2020-09-03T20:01:58+00:00September 3rd, 2020|Blog, college tax credit, education credit, New Tax Laws|0 Comments

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

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:

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 Linkenheimer LLP|2020-09-03T20:03:39+00:00September 17th, 2019|college tax credit|0 Comments