Use tax breaks to offset college expenses

The IRS has published facts about the tax deduction for tuition and fees that is available to help parents and students pay for post-secondary education. If you're facing college expenses this fall, here's what the IRS wants you to know.

• The deduction is up to $4,000 for single filers with adjusted gross income (AGI) of $65,000 or less and joint filers with an AGI of $130,000 or less. If income exceeds these amounts, the deduction drops to a maximum of $2,000 for an AGI up to $80,000 for single filers and $160,000 for joint filers. No deduction is allowed over these income thresholds.
• The deduction is "above the line," so you don't have to itemize to benefit.
• You can't take the deduction if your filing status is married filing separately.
• You can't take the deduction if you are claimed, or can be claimed, as a dependent on someone else's tax return.
• You can't claim the deduction if you or anyone else claims the American Opportunity or lifetime learning credit for the same student in the same year.
• The deduction can't be based on expenses paid with tax-free scholarship, fellowship, grant, or education savings account funds, tax-free savings bond interest, or employer-provided education assistance. This also applies to expenses paid with a tax-exempt distribution from a qualified tuition plan, except for expenses paid with the portion of the distribution that is a return of your contribution to the plan.

There are other tax breaks for college expenses, all with requirements and restrictions of their own. As you can see, the rules make planning necessary if you want to maximize your tax benefit for college costs. For help in identifying and utilizing the deductions and credits most beneficial in your situation, give us a call now.