Law Office of Tillena G. Clark, LLC

Directions7315 Wisconsin Ave., Suite 400W
Bethesda, Maryland 20814

Tax Newsletter

Tax Credit for Higher Education Costs

You may be able to receive tax benefits if you are saving or paying for expenses related to a higher education, either for yourself or for a family member. There are a number of tax benefits that you may be entitled to.

Educational Tax Credits

The American Opportunity Credit (Hope Credit) and the Lifetime Learning Credit apply to tuition and enrollment fee expenses. Only one of these can be applied per qualified student per year. Different rules apply to each separate tax credit. However, neither credit can be used by households with incomes of $62,000 or more or for households of combined incomes of $124,000 or more (joint returns).

Individual Retirement Accounts (IRAs)

The education IRA and traditional IRA may be applied to tuition expenses, as well as expenses related to books, supplies, and room and board. Withdrawals from an education IRA account are tax-free, with limitations.

Student Loan Interest Tax Deductions

Interest paid on student loans may be deductible. This only applies to the first 60 months of loan interest. The loans must also be used for at least half-time in a degree program.

Qualified State Tuition Programs

Under these programs, future tuition expenses are prepaid, and earnings are not taxed until they are withdrawn.

U. S. Savings Bonds

The interest earned is excludable from income. However, this only applies to specific qualified bonds.

Employer’s Educational Assistance Programs

Like savings bonds, employer benefits are excludable from income, with a $5,250 annual limit.

As some higher education benefits will not allow you to claim two educational benefits simultaneously, those taxpayers interested in taking advantage of higher education tax benefits should investigate the specific terms of the relevant benefit programs.

  • Self-Employment Tax and Funding Retirement
    The Internal Revenue Service requires certain individuals who have a trade or business to pay self-employment tax. What is the reason for this? Social Security Withholdings If you work for someone else,... Read more.
  • Tax Breaks for Homes Used for Business
    Certain expenses related to maintaining a home, such as mortgage interest and property taxes, are deductible from gross income for taxpayers able to itemize deductions, i.e., they can reduce the amount of income subject to federal... Read more.
  • The Effect of Marital Status on Federal Taxes
    For federal income tax purposes, there are five tax “statuses:” single; head of household; married filing jointly; married filing separately; and qualifying widow(er) with dependent child. Status affects tax credits and... Read more.
  • Employer Bankruptcy and Employee Benefits
    Generally, a business that is facing serious financial difficulties might seek to file for bankruptcy under either Chapter 7 or Chapter 11 of the U.S. Bankruptcy Code. Chapter 7 bankruptcy is more severe, as it involves a liquidation of... Read more.
Tax News Links
Share This Page:
Designed and Powered by NextClient

© 2006 - 2019 Tillena G. Clark, LLC. All rights reserved.
Theme WebExpress™ attorney website design by NextClient.com.