It seems the nation is so concerned about the high cost of higher education even the Internal Revenue Service is stepping in to provide a little relief. The IRS is not only administering a series of tax credits, but also giving students – or their equally strapped parents – a series of income tax deductions. Those attending distance learning program classes and traditional on campus schools should explore these credits.
These days it’s extremely difficult to get a degree without taking out a college loan. While the loans allow a grace period of six months after graduation before paying, with many of these loans now going into thousand upon thousands of dollars, they end up taking forever to re-pay. As of last year, the IRS has made it a little easier to pay off that debt. If you need more information about online college grants, look on the internet.
For starters, the IRS increased what’s called the phase out limit on who can get the deduction, i.e., phase out as in how much you can earn and still claim a deduction. The limit for an individual was $55,000 adjusted gross income for a full deduction and $55,001 to $70,000 for a percentage. For those filing joint returns, the cut offs were $110,000 and $145,000 respectively. The phase out limit has been increased to $60,000 and $75,000 for single claimants and $120,000 and $150,000 for those who file joint returns.
There are some other things to consider. First, one must attend accredited, “qualified” institute. The student must be taking at least a half-semester’s course load. The university can be either an on campus or online college. It can also be an accredited trade school. On the plus side, the money from the college loan can be used to pay a fairly wide list of items, from tuition to transportation.
There are some important restrictions to contemplate. The IRS will not allow any deductions if the loan comes from a personal relative. They also won’t allow most deductions if it’s part of a private corporation’s educational program, especially one that employs the student. There is also a limit to how much one can deduct a year. There is an abundance of information about schools online on the web.
From there, if a single person earns under $60,000 in the tax year in question, one should get a statement from the loaning institution. Break down what went to the principle from what was used to pay interest. Now deduct the interest paid utilizing a 1098-A form. If it’s between $60,001 and $75,000, go to the IRS web site and learn a formula they provide to discern the percentage of interest that can be deducted. If filing a joint return, substitute the numbers provided above regarding the various phase out numbers.
While the IRS does try to keep the whole process as simple as possible, there are an incredible number of possible deductions and restrictions one has to constantly be aware of. As such, it’s probably a good idea to do the whole shebang with a certified tax specialist. It may cost a few dollars at the onset, but these are more than compensated for when one gets that $2,500 deduction.
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