September 4, 2013
The beginning of September is synonymous with the back-to-school season. If you have a child attending college, or if you are a student yourself, September is also likely to be synonymous with the beginning of annual tuition payments. While attending and paying for college may be taxing in many ways, there is some good news when it comes to tax deductions and credits related to college tuition.
As part of The American Taxpayer Relief Act, the legislation passed by Congress to avoid a “fiscal cliff” and maintain tax cuts, several tax benefits have been extended to help ease the burden of paying for classes at eligible education institutions. Tax benefits include:
The American Opportunity Credit, previously known as the Hope Credit, provides an annual credit of $2,500 per student for the costs of tuition, fees, and course materials for the first four years of an individual's post-secondary education. This tax credit is available to households with a modified adjusted gross income of $80,000 or less for single filers or $160,000 or less for married filers filing jointly.
The Lifetime Learning Credit can also lower a household's tax burden by reducing the cost of undergraduate or graduate education, even for those students who choose to take only one class at a time. The tax credit can be applied to 20%, or $2,000, of the first $10,000 of college tuition and related expenses each year. It can be used for approved expenses incurred by any member of a household enrolled at an eligible education institution.
Tuition-based tax deductions can be used by single tax filers with income between $65,000 and $80,000 and married joint filers with an income between $130,000 and $160,000.These deductions allow tax filers to claim $2,000 in tuition and related fees, depending on their tax situation. Taxpayers do not have to itemize in order to claim this benefit.
Employer-sponsored tuition assistance deductions may also be used to reduce your tax burden. The IRS allows an employee to exclude taxable income up to $5,250 per year when they receive employer-provided tuition assistance for undergraduate or graduate classes. Employers who offer tuition assistance to their employees can also deduct these costs as a business expense.
While we have outlined some of the most common tax deductions and tax credits available to individuals paying college tuition, there are many variables to consider when planning the most effective tax strategy for your unique situation. We would be happy to discuss your options for mitigating your tax expenses and reducing the costs of college education. Contact our firm today to speak with one of our tax professionals.
Your success is our main priority, which is why we work to identify the right blend of services for each client. With Rickhoff & Associates, you will also enjoy our personal approach to doing business. We know that every client has different goals and changing needs, so we work with you throughout the year to offer advice, review your financial status, and ensure there are no surprises at year-end. Professional, personalized, client-focused…Rickhoff & Associates is the new breed of accounting firm.
This tax season is an important one for many business owners because it’s the first that will be impacted by the Tax Cuts and Jobs Act (TCJA). How big of an impact is dependent on your unique situation. We’ve compiled this short list of provisions that may affect the business community:
According to Forbes.com, Super Bowl viewers traditionally load up on millions of pounds of less-than-healthy foods during the big game—including ribs, pulled pork, tortilla chips, nuts, popcorn and bacon—all washed down with beer (the Super Bowl beverage of choice). If you are trying to stick to your New Year’s resolution to eat better, consider a few healthy substitutes for the traditional Super Bowl eats:
The combination of running a business and your life and preparing for tax time can drive some people into a slight panic. But no need to get stressed if you are prepared. Now is the time to start organizing all documents required to file your tax return.