Show Me the Money! Part 4: Tax Breaks & Benefits
By DANIEL SILVER, Eastern Staff Writer
The income tax deadline of April 15
looms only one month away, and the good news is that the
For married taxpayers filing jointly with income under $103,000 ($51,000 for singles) both the Hope credit and the Lifelong Learning credit may provide significant advantages. To claim these credits, the taxpayer must pay qualified education expenses for the higher education of an eligible student (defined as oneself, one’s spouse or a dependent claimed as an exemption on the tax return). Married taxpayers filing separately may not take these credits, nor may anyone listed as a dependent on someone else’s return. (However, parents who pay expenses and list a student as a dependent on the return do qualify for the benefit.)
The law permits students to qualify
In general, the
Additional education-related benefits may further cut tax obligations. For example, even if they do not itemize deductions, taxpayers can reduce their before-tax income by deducting interest on loans taken solely to pay for education expenses. This provision allows taxpayers—depending on what they earn—to lower their taxable income by as much as $2,500. Borrowers who pay for their own educational expenses (that for this benefit includes tuition and fees as well as room and board, books and supplies, transportation and other necessary costs), for their spouse’s or for a dependent’s, qualify for this deduction.
Married taxpayers who earn less
than $130,000 and file jointly (less than $65,000 if single) can make use of
another benefit, again even if they do not itemize, that will reduce their
before-tax income. Only those who do not claim either a
As with the other provisions, the person claiming the benefit must pay educational expenses either for oneself, one’s spouse, or one’s dependent. (Also, the law states that to qualify for the tuition and fees benefit, the student must have either a high school diploma or a GED credential and must enroll in at least one course at an eligible institution.) As with the Hope and Lifelong credits, only funds paid for tuition, costs and fees both required for enrollment or attendance and paid directly to the learning institution count towards this deduction.
For IRA account holders, another provision allows them to take distributions from their accounts for educational expenses without having to pay the ten-percent penalty that normally applies for early withdrawal.
Those interested will find more
detailed information for these and other tax benefits in the
All "College Tips" columns are available at
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Potomac State College of West Virginia University at http://www.potomacstatecollege.edu/ or (304-788-6820 or tollfree: 1-800-262-7332)
Community and Technical College System of West Virginia at http://www.wvtechprpe.wvnet.edu (304-558-2411)