Tax Benefits for a Higher Education There are a number of tax benefits available when paying for a higher education. There are tax exclusions, deferrals, credits, deductions, and relief from tax penalties. Gaining an understanding about each and taking advantage of every tax benefit can help you as you look to fund a college education.Tax Education Tax Credit Two tax credits are obtainable for college funding. These include the American Opportunity Credit and the Lifetime-Learning Credit. Those that have an adjusted gross income below a defined amount are eligible for these tax credits. The amount of credit you can claim is directly dependent on how much you pay for qualified tuition coupled with your adjusted gross income. To learn more about how to claim these credits, contact Rusty Hopkins, taxation specialist at BatesCarter. Using Retirement Funds A traditional and Roth IRA account can be used for education expenses. The standard 10% penalty withdrawal under the age of 60 will not apply as it pertains to your traditional IRA. Ordinary income tax however will apply to at least some of the withdrawal from your traditional IRA, but ordinary income tax is not as likely (or smaller) for a Roth IRA. Available Tax Deductions A tax deduction is typically taken only if the income is too high for the tax credit. Although the tax deduction reduces your amount of income, it does lower the amount of tax you pay. It is also important to remember that business expense deductions are allowed for an education that serves the taxpayer’s business. Personal interest is typically non-deductible, so deductions must meet the following criteria if you looking to deduct student loan interest:
BatesCarter works hard for you so that you keep as much money as you can that you earn. In doing so, it makes affording life expenses, such as paying for a college education, much easier. Our tax professionals will work with you to help you uncover and take advantage of any and all tax benefits. Contact us today if you would like to learn more about BatesCarter or if you have a question about other accounting services in Gainesville, GA we provide. |
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