The cost of higher education in America goes up every year.
For 2013 -2014 school years, the average annual price of tuition and a public four-year college was $ 8,893 (in state) and $ 22.203 (out-of-state).
tuition fees and annual fees at private four-year colleges was more than $ 30,000 per year!
There is no wonder that the total debt of student loans in the United States approached $ 1000000000000 in 2014.
the good news is that the federal government recognizes the importance of invest in higher education and offers a number of tax breaks for students and their families.
the three main tax advantages for students in the form of tax credits related to education, tax deductions and education savings accounts.
tax credits are the best type of tax break. Tweet this
Unlike deductions, lowering your total taxable income, tax credits are subtracted directly from your tax bill.
There are two types of tax credits available to students and their families:
American Opportunity Tax Credit
Formerly known as credit name Hope, this $ 2,500 credit is available for all four years of half of full-time studies.
This appropriation is refundable because it can actually generate a refund for those whose tax bill is less than 2 500 $.
If the student is a dependent, his parents are also eligible for the credit. The credit is phased out for high income earners.
Lifetime Tax Credit for learning
This credit is available for anyone taking college or vocational training beyond high school .
There are no minimum listing requirements - you could take a class and qualify - and credit covers 20 percent of tuition up to $ 10,000 (as of other words, a maximum of $ 00)
the same rules. and the limits for dependent persons and people with higher incomes.
The IRS also offers several specific deductions for education to taxpayers. Deductions are expenses that reduce your total taxable income.
The first deduction for student loan interest. When you take out a student loan from the federal government, part of your monthly payment is pure interest on the loan.
The IRS allows you to deduct up to $ 2,500 of the interest from your taxable income to ease the burden of these loans.
The second deduction for the costs of higher education, including tuition, up to $ 4,000.
There is a catch, however. You can not claim this deduction if you have not asked for one of the two tax credits described above.
If you are a working adult and your employer covers all or part of your tuition fees for training or graduate studies program continues, these contributions can be deducted from your taxable income.
You can deduct up to $ 5,250 per year for tuition, fees, books and supplies to qualify educational programs.
Of course, the best way to avoid a debt crisis at the university is to start saving early. Tweet this
The federal government encourages the long-term savings by giving tax breaks to people who invest money in education savings accounts.
There are currently two types of tax-advantaged education savings accounts:
account Coverdell education savings
eligible taxpayers can invest up to $ 2,000 per year for students under 18 years
money was not deducted from your taxable income, but you do not have to pay tax when you withdraw the funds as long as they are used for educational expenses.
Note that the high-income people can not qualify.
529 Plan
These tax-deferred college savings plans are offered by individual states.
There are no income limit and you can invest as much as you want each year to a maximum amount.
Some 529 plans allow you to pre-pay tuition at a state university while others operate as a managed investment account.
529 plan contributions may be deducted from your taxable income, but withdrawals will.
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