by
Carl Hampton
03/16/2007
As the costs for the favor of a college
education continue to rise every year, is it
any wonder that achieving a decent education
is seen as a great privilege as opposed to a
legitimate right?
The average cost at a private college last
year for tuition, fees, room and board, was
$30,207.00. The experts predict that the
average cost will increase by 5% each year;
enrollment at a more prestigious college
will cost you even more.
In comparison, the average cost of a
year’s tuition, fees, room and board at a
public university was $11,351, and if the
experts are correct these prices will also
rise 5% per annum.
The luxury of a good education is a valuable
asset, though regardless of scholarships,
grants, and federal loans, with these kinds
of exorbitant costs you may need to consider
alternative types of loans.
Taking out a loan to further your education
might not be such a bad idea when it comes
to filing your tax return; e.g. $2,500.00 of
the interest on your student loan might be a
deduction that will help reduce your taxable
income, possibly resulting in a smaller tax
bill.
These are some of the filing requirement
conditions should you choose to itemize this
deduction:
If you are married, you cannot file
separately to get this tax break; you must
file jointly.
You are not entitled to this deduction if
you can be claimed as an exemption on anyone
else’s tax return.
The loan must have been taken out by you,
your spouse, or a dependent (related; or who
receives most of their support from you).
The educational institution must meet
student aid program guidelines administered
by the U.S. Department of Education.
The qualifying student must be enrolled at
least half-time in a program that leads to a
degree, or other educational credential
(certificate).
The loan must have been taken out solely to
pay for educational expenses.
The loan cannot be from an employer, or from
a related person. The expenses incurred/paid
must be within a “reasonable amount of
time” before or after you received the
loan; i.e. must be traced to a particular
academic period. The loan must be used to
pay qualified higher education expenses,
such as tuition, fees, room and board,
books, supplies, transportation, and other
necessary expenses.
The importance of education is solidified by
the large number of provisions that Congress
incorporated in the Economic Growth and Tax
Relief Act of 2001 (e.g. tax breaks for
saving toward future education; help for
parents with current education costs).
However, unless Congress acts before
December 31st, 2010, to renew, extend, or
amend these provisions, the changes will
automatically expire.
Keep in mind, that like many other tax
breaks, the student loan interest deduction
is limited by the IRS if you earn over a
certain amount of money. The differing
limitations, interactions and definitions of
these provisions, along with the education
benefits already in the Internal Revenue
Code, make it more important than ever to
hire a CPA who can analyze and evaluate
which of the education tax benefits apply to
your particular situation.
So as you stumble through the complications
of tax planning, just remember that
education is a valuable commodity, and
“THE MIND IS A TERRIBLE THING TO WASTE!”
Have an opinion or a question you would like
me to answer, then write me!
http://www.CarlHampton.com
