by Ruckertax | May 9, 2014 | College, Frequently Asked Questions |
TABLE OF CONTENTS What types of tax relief are available for costs of my children’s higher education? What is the education tax credit? Do any tax planning considerations apply to the education tax credit? Do living expenses while in school qualify for tax relief? How does a Coverdell (Section 530) program work? How can my family make best use of a Coverdell (Section 530) program? What are qualified tuition programs? How do Coverdell Section 530 plans and qualified tuition Section 529 plans differ? Can my traditional IRA be used for education? Can a Roth IRA be used for education? What tax deductions are available for college education? What tax benefits are available for continuing/adult education for a hobby or a sideline? Can I deduct student loan interest? If I take a home equity loan to pay education expenses, can I deduct the interest? What tax treatment applies if my student loan debt is canceled? What’s the tax relief for education savings bonds? Must I pay tax on my employer’s payment or reimbursement of my education expenses? Can I take tax deductions from education I pay for that helps me in my work? WHAT TYPES OF TAX RELIEF ARE AVAILABLE FOR COSTS OF MY CHILDREN’S HIGHER EDUCATION? A wide variety of tax relief is available, but you’ll need to choose which credit or deduction to claim or which savings plan to use based on your individual tax situation. You also can’t use two different kinds of relief for the same item. For instance, you can’t take the higher education credit and tuition fees deduction for the same student for...
by Ruckertax | May 9, 2014 | College, Parenting |
Various tax benefits, including tax exemption, tax deferral, tax credits, and deductions, are available if you are paying or saving for college or other higher education costs. This Guide suggests ways to take advantage of these benefits. TABLE OF CONTENTS Coverdell Education Savings Accounts (Section 530 Programs) Qualified Tuition Programs (Section 529 Programs) Traditional and Roth IRAs Education Savings Bonds Education Credits Qualified Tuition and Related Expenses Deduction Employer-Provided Education Assistance Student Loans Many tax benefits are available to help you pay higher education costs, whether for your children or yourself. Because of the variety of benefits and programs, this area is one of the most complex that an individual can face. This Financial Guide discusses strategies you can use to build savings for higher education, and tax credits currently available to help ease the financial burden of paying for education. Eligibility rules vary for education credits and savings plans and most are subject to income limitations. Related Financial Guide: For more information about saving and investing to cover education costs, please see the Financial Guide: YOUR CHILD’S EDUCATION: How To Finance It. COVERDELL EDUCATION SAVINGS ACCOUNTS (SECTION 530 PROGRAMS) Starting in 2013, you can contribute up to $2,000 to a Coverdell Education Savings account (a Section 530 program formerly known as an Education IRA) for a child under 18. These contributions are not deductible, but they grow tax-free until withdrawn. Contributions for any year, for example 2013 can be made through the (un-extended) due date for the return for that year (April 15, 2014). Note: There is no adjustment for inflation; therefore the $2,000 contribution limit is expected to remain at...
by Ruckertax | May 9, 2014 | Frequently Asked Questions, Parenting |
TABLE OF CONTENTS When should I start saving for my child’s education? How much will my child’s college education cost? How should I invest my child’s college fund? What is the American Opportunity Tax Credit? What is the “kiddie tax”? What is an Education IRA and who is eligible for one? If you have insufficient savings for your child’s education, what should you do? What types of grants are available for college? What types of loans are available for college? How can I increase the amount of financial aid my child is entitled to? How can I save taxes on college savings? WHEN SHOULD I START SAVING FOR MY CHILD’S EDUCATION? This depends on how much you think your children’s education will cost. The best way is to start saving before they are born. The sooner you begin the less money you will have to put away each year. Example: Suppose you have one child, age six months, and you estimate that you’ll need $120,000 to finance his college education 18 years from now. If you start putting away money immediately, you’ll need to save $3,500 per year for 18 years (assuming an after-tax return of 7 percent). On the other hand, if you put off saving until the child is six years old, you’ll have to save almost double that amount every year for twelve years. Another advantage of starting early is that you’ll have more flexibility when it comes to the type of investment you’ll use. You’ll be able to put at least part of your money in equities, which, although riskier in the short-run, are better able...
by Ruckertax | May 9, 2014 | Frequently Asked Questions, Parenting |
TABLE OF CONTENTS How much will it cost me to raise a child? What costs can I expect during the first year? How much will I spend on my child during ages one through six? How much will I spend on my child during ages six through twelve? How much will I spend on my child during ages thirteen through eighteen? How can I teach my kids good financial skills? HOW MUCH WILL IT COST ME TO RAISE A CHILD? We can’t tell you exactly what your child will cost, but we can provide you with estimates. Knowing what to expect will allow you to plan for the future. Here is a breakdown of the items you’ll need, and an estimate of their costs. Note: These estimates are for a first child. Bear in mind that second or third children will cost less than the first, since you will already have purchased many of the items you need. Typically parents with 3 or more children spend 22 percent less per child than those with just two children. Government estimates say that a middle income family in 2012, defined as having an annual income between $60,640 and $105, 000, will spend a total of $241,080 to raise a child to age 17. This figure represents a 2.5 percent increase from 2011 and does not include expenses incurred beyond the age of 18. If you include the cost of college, whether public or private, that cost goes up significantly. And, families that earn more generally can expect to spend more on their children. According to the USDA report, Expenditures on Children by Families,...
by Ruckertax | May 9, 2014 | Parenting |
How can you properly fund your children’s education without draining your current cash flow? What should you do if they are a few years away from college and your education fund won’t be enough? How can you increase your chances of getting financial aid? What tax benefits might be available to you? This Financial Guide answers these questions. TABLE OF CONTENTS Savings And Investment Strategies If You’re Caught Short Sources Of Financial Aid Planning Techniques How To Reduce Taxes Government and Non-Profit Agencies With the costs of a college education rising every year, the keys to funding your child’s education are to plan early and invest shrewdly. However, there are steps you can take if you get a late start. Moreover, there are a number of effective techniques for increasing financial aid opportunities and reducing taxes. SAVINGS AND INVESTMENT STRATEGIES According to the College Board, the annual increase in inflation-adjusted average tuition and fees at public four-year colleges and universities has declined in each of the past five years, from 9.5% in 2009‑10 to 0.9% in 2013-14. Despite the decline, college is still expensive and proper planning can lessen the financial squeeze considerably–especially if you start when your child is young. It should also be noted that in 2012-13 the average amount of aid for a full-time undergraduate student was about $13,370. Here are some guidelines–geared to parents whose children are no older than elementary school age–for funding your child’s education. START SAVING EARLY We cannot emphasize enough that getting an early start is basic to funding your child’s education. The earlier you start, the more you’ll benefit from...
