More College Tax Breaks and Education Benefits
Last week I wrote an article about taking advantage of education benefits and deductions for your taxes. With the tax deadline of April 15 quickly approaching, I thought a few more tips to save the most on your tax return was in order. So without delay, here are more ways to take advantage of education benefits and tax breaks for students.
If your employer is cool enough to agree to reimburse you for a course you take, up to $5,250 of that income is tax free. The Employer Education Assistance benefits must have been used for the usual college expenses: tuition, fees, books, and supplies. Other expenses such as travel, housing and food are not included. And courses involving sports, games or hobbies are not included, unless they are required as part of a degree program or are related to the business of your employer. If payments above $5,250 have been made, these may also be tax-free if they represent a working condition fringe benefit. This means that if you had paid for the expenses, you would have been able to deduct them as an employee business expense.
You can take a tax deduction for college tuition and other mandatory school fees by using the Tuition and Fees Deduction. The maximum amount of tuition and fees deduction you can claim is $4,000 per year. If your income is over $65,000 but under $80,000 (unmarried), then the maximum amount you can deduct is $2,000. For married couples filing a joint return, the phaseout range is over $130,000 but under $160,000. If your income is over these limits you do not qualify for this deduction.
Unlike most deductions that cover almost all costs associated with college, the Tuition and Fees Deduction only covers expenses for tuition, registration fees and other required fees. Other expenses such as books, supplies, software, housing and other miscellaneous costs can not be deducted. Qualifying expenses are reported by using Form 1098-T.
You might be eligible to claim the Hope or Lifetime Learning tax credits for college expenses. Taking the tax credits generally will be better than claiming the Tuition and Fees Deduction. Keep in mind that you cannot claim more than one tax benefit for the same education expenses.
To get an idea of how you will be taxed, take a look at the 2007 Tax Rate Schedule.You can use the tax rate schedules to help plan your finances and better understand how taxes work. If you are filing your taxes for the first time, I recommend going with a professional tax company. Don’t try to do your taxes by yourself. And remember, the deadline is only a few weeks away. Good luck!
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