Are you Missing Education Tax Breaks?

Category: Tax Law and Planning

From James Jimenez, CPA of Fass and Associates, CPAs:

"DON’T MISS OUT ON EDUCATION TAX BREAKS

A recent report by the Government Accountability Office pointed out that 27% of 1.8 million taxpayers eligible for education-related tax breaks did not take advantage of them on their income tax returns. As a result, they paid from $169 to over $500 more in taxes than necessary.

If the complexity of the tax credits and deductions for education expenses is keeping you from claiming them, you, too, may be paying higher taxes than necessary. With a little effort, you can get the details and advice you need to make the wisest choices for your particular situation. Here’s a brief rundown of what’s available.

* Education savings accounts let you set aside up to $2,000 per year per child in a tax-deferred account for elementary, secondary, or higher education expenses at either private or public schools.

* Section 529 plans include tax-favored college savings plans and prepaid tuition accounts. Tax-free withdrawals can be used to pay for tuition, fees, supplies, equipment, and certain room and board expenses.

* The college expense deduction lets you deduct up to either $2,000 or $4,000 (depending on your income) for tuition and related college expenses. If you qualify, you can deduct these expenses whether or not you itemize

* Student loan interest of up to $2,500 is deductible, subject to income limitations.

* A Hope credit of up to $1,500 per student can be claimed for tuition and fees relating to the first two years of post-secondary education.

* A lifetime learning credit of up to $2,000 per family can be claimed for post-secondary education expenses and certain job-related courses."