Tax Benefits for Your College Education
Hope Scholarship Tax Credit
In order to help offset the skyrocketing costs of going to college, the federal government has set in place a few tax cuts to you pay for the first couple of years of college. The HOPE Scholarship tax credit is available for the first two years of college. You or your parents could receive a 100% tax credit for the first $1,000 of tuition and 50% credit on the second $1,000. That means you could receive up to $1,500 in tax credits for the first two years you attend college. Of course, there are income limits that apply. The limit for joint filers is between $80,000 and $100,000 adjusted gross income. The limit for a single filer is between $40,000 and $50,000 adjusted gross income.
The Lifetime Learning Tax Credit
This credit is not only for adults who are going back to school. It is also available to college juniors, seniors, and graduate students. You or members of your family could receive a 20% tax credit for the first $5000 of tuition and for the first $10,000 after that. The same income limits apply.
Beginning in 1998, withdrawals from IRAs could be made without penalties for higher education expenses. For parents with children under 18, contributions to a tax-free Education IRA can be made up to $500. Then withdrawals can be made tax-free for tuition and other related expenses. One catch is that you can not make withdrawals from an Education IRA and qualify for the HOPE Scholarship or Lifetime Learning Credit. There are income limits that apply.
Student Loans at a Lower Cost
Student loans are a huge burden for anyone just graduating from college. Now there are student loan interest deductions available to reduce the repayment in the first 60 months loans are paid back. It is available for all loans to students and parents.
For additional information on these or other programs available by the Federal Government, call 1-800-4FED-AID or visit the web page www.ed.gov.
For information on getting elementary and middle school children ready for college early, call 1-800-USA-LEARN.