Who out there couldn’t use some good tax relief tips? Truth be told, there are any number of ways to save on taxes. But many of the tax breaks and tax cuts might remain unknown without a professional tax preparer from whom to seek assistance. Here, we will discuss one such tax break category: educational tax credits.
Going back to school is expensive enough as it is. Add to that paying exorbitant taxes, and you could be looking at a trip to the poor farm. Retail stores offer opportunities to save money on back-to-school supplies – it’s their way of trying to be helpful. We at Tax Defense Partners want to be helpful, too. So, here are a handful of ways to get some tax relief and offset those scary education costs.
Lifetime Learning Credit
You can get help paying for professional, graduate, and undergraduate degree courses with this credit (limitations apply). If, in a Midwestern disaster area, the student attended college, taxpayers who are eligible could qualify for $4000 or $2000. This can reduce your amount of owed income tax and is a nonrefundable credit.
For the same tax year and the same student, you can only claim either the American Opportunity Credit (see below) or the Lifetime Learning Credit. But not both. Decide, for your particular situation, which of these would be most beneficial.
The American Opportunity Credit
This is a modification of the already existing Hope Credit (see below), which makes it available to a wider range of taxpayers. This credit includes certain equipment and fees as well as required course materials as qualifying expenses. And, rather than being able to claim the credit for only two post-secondary education years, it can be claimed for four.
The Hope Credit
This credit assists parents and students with the payment of the first couple of years-worth of college. Additionally, if a student didn’t claim the American Opportunity Credit, they may be able to claim several thousand dollars if they attended in a Midwestern disaster area. Before attempting to deal with this particular credit, please consult a tax professional for an updated status and/or version.
Grants, Fellowships, and Scholarships
Within limitations, fellowships and scholarships are tax-free. Expenses that qualify here can include equipment, supplies, fees, required course materials, tuition, and other course -related expenses. And by required, the IRS means completely and totally mandatory in order for a student to enroll and attend the college/course.
Scholarships and grants are treated alike in that they are free of tax provided they are utilized for educational expenses that qualify and take place during the time that the grant was received by the student.
Fee and Tuition Deduction
This is the most straightforward of all deductions dealt with here. On qualifying expenses (i.e., required expenses and fees, tuition, and other qualifying expenditures) you can deduct $4000 (check for current amounts). Your gross income is adjusted with this deduction thereby reducing your taxable income amount. None of the above educational credits can be claimed, however, for college expenses if you use this deduction.
Student Loans
Depending on the circumstances, a special deduction may be allowed when it comes to student loan paid interest. Your taxable income could be reduced by this deduction – possibly up to $2500 or more (again, check for current amounts).
The best place for tax relief tips and assistance in all things tax related is the seasoned, knowledgeable professionals at Tax Defense Partners. For years, and through hundreds upon hundreds of cases, we have successfully helped people with all of their tax issues. With our assistance, you can pay the lowest amount allowable by law and still have it accepted by the IRS. Don’t wait! Contact us today for a free consultation. Let us do the worrying about your tax problems so that you can get on with your life.