Personal Finance
We are dedicated to keeping clients abreast of the latest developments and tax-saving strategies. This section includes a library of hundreds of timely articles about business, taxes, finances, trends and the like. The articles are categorized by subject matter, which can be accessed from the links. Click on your topic of interest and find a wealth of information.TAX BREAKS FOR EDUCATION & STUDENT AID INFORMATION
This section is provided to assist clients in the various aspects of post-secondary education planning including tax benefits, aid programs, educational savings programs, etc. We encourage you to call for an appointment so that we can help you plan for your children’s education.
- Above-The-Line Education Deduction
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Through 2011, taxpayers are allowed up to a $4,000 above-the-line deduction for qualified higher education tuition and related expenses. Unless extended by Congress the deduction will no longer be available after 2011.
- Education Credits Can Be Claimed On An Amended Return
- The IRS has announced that individuals who could have claimed the education credit but failed to do so on their original returns, may claim the credit on an amended return. In general, an amended return may be filed within three years from the date your return was filed or within two years from the time the tax was paid, whichever is later.
- Coverdell Education Savings Accounts
- When originally created, the maximum contribution to a Coverdell was $500. Subsequently it was temporarily increased to $2,000. However, the increased amount was scheduled to return to $500 starting in 2011. Congress has extended the more liberal contribution limits through 2012.
- Deduction for Higher Education Interest
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When this deduction was first created some years back the deduction was limited to interest for the first 60 months after the first payment was due. The 60-month rule was temporarily eliminated through 2012. Without further Congressional action the 60-month limit will return in 2013.
- Education Credits - Who Gets the Benefit?
- When it comes to who gets the benefit of the education credits, it might not be who you would expect. The IRS has provided clarification as to who can claim the education credits. These are credits allowed for qualifying higher education costs for yourself, your spouse, or your dependents.
- Educational Tax Credits
- The law provides for two nonrefundable tax credits, the American Opportunity (or Hope Scholarship credit) and the Lifetime Learning Credits. Both credits will reduce a taxpayer's tax liability dollar for dollar until the tax reaches zero. Any Hope or Lifetime credit in excess of the tax liability is lost. The American Opportunity credit provides for a partial excess credit refund. The credit is not allowed for taxpayers who file married separate returns. The credits are elective and the taxpayer must choose between the two credits for each student.
- Self-Employed Education Twists
- Self-employed taxpayers should consider their options carefully when it comes to applying tax benefits for their own education tuition and expenses. Tax law provides multiple ways to benefit from the educational expenses and one may provide more benefit to you than another based on your particular set of circumstances.
- Home Equity Can Provide Funds for Children's Education
- Many parents of college age children would like to utilize the equity in their home to help pay for college expenses. When considering this course of action, there are two issues: (1) Should the first trust deed be refinanced, or should a second trust deed line of credit be secured? and (2) Will the interest be deductible?
- Penalty-Free IRA Withdrawals
- Generally, when funds are withdrawn from an IRA before a taxpayer reaches age 59-1/2, a 10% early withdrawal penalty applies to the distribution. However, penalty-free withdrawals are permitted if the funds are used to pay qualified higher education expenses. The withdrawals will still be subject to regular income tax.
- Qualified Tuition Programs - Section 529 Plans
- Section 529 Plans (named after the section of the IRS Code that created them) are plans established to help families save and pay for college in a tax-advantaged way and are available to everyone, regardless of income. These state-sponsored plans allow you to gift large sums of money for a family member’s college education, while you maintain control of the funds.
- Electing Out Of & Maximizing the Hope Credit
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CAUTION: This article does not apply to tax years 2009 through 2012 since the American Opportunity Credit replaces the Hope Scholarship Credit for those years.
For taxpayers that strive to maximize their tax benefits, the Hope education credit can be challenging. Generally, students enter college in the fall of their first year, thus making the first year a short one.
- Use Appreciated Stock to Fund Obligations
- You might want to consider gifting stock that has appreciated in value to your children (over age 23) to help pay for their education or to purchase a home, or to parents to help pay for their eldercare. By doing this, you shift the tax liability for the gain from selling the stock to the child or parent, who with proper planning, may pay a lower tax on the profits than you would.