Many people without wealthy parents or access to scholarship will find college expenses overwhelming. In addition to the high tuition fee, there are many expenses. The good news is that there are ways to reduce this financial burden. There are many tax credits and deductions that can give you some cash as reimbursement.
Expenses covered by this are textbooks, tuition fees, and other college supplies. To be eligible, you must have paid expenses for yourself, a spouse, or a dependent for at least four years in a post-secondary school institution.
It is a dollar to dollar credit for the first $2,000 of eligible expenses. You get to recoup 25% of the next $2000 for qualified expenses to a total of $2,500. Here are the rules guiding AOTC:
With the Lifetime Learning Credit, you qualify for a tax credit for books, tuition, supplies, and other fees for lectures in a qualified educational institution. It has no limit in the year in which you can take the credit, and the student does not have to be enrolled for a degree program.
The credit can be claimed for the expenses paid by yourself, your spouse, dependents, etc. Here are the rules guiding the lifetime learning credit
• The credit cannot be refunded
• You cannot claim Lifetime Learning Credit and AOTC for the same student. You can claim Lifetime Learning Credit for one and AOTC for another if two family members have qualifying education expenses.
You get to deduct interest on qualifying educational loans for you, your spouse, or dependents. To, however, repay the loan, you must be legally obligated. Should a family member that is not legally obligated repays your student loan, you are the one that gets the deduction and not your family member.
Also, should another person claim you as a dependent, you cannot deduct the student's loan. For instance, if you claim your spouse as the dependent and he or she is making payments on the loan, neither of you can take the deduction. While your spouse is obligated to repay the loan, they are your dependent and cannot claim the interest deduction.
You could qualify for an Adjustment to Income on Schedule 1 if you are a K-12 instructor, principal, counselor in a school that provides secondary or elementary education.
You, however, cannot be reimbursed for:
An employer, before the Tax Cuts & Jobs Act of 2017 (TCJA), that pays for work-related educational expenses, could deduct the expense as a miscellaneous itemized deduction. With the advent of TCJA, it eliminated many miscellaneous itemized deductions, making deductions unavailable. Should your employer, however, give educational benefits, you could qualify for a tax break.
Employers can create a written plan or an educational assistance program (EAP) that benefits the company's employees. Under this program, the company can give $5,250 of educational assistance to workers and exclude this from the worker's taxable income.
Don Bell Law
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