Families with college students may save tax on their 2017 returns with one of these breaks
College tuition is one of the largest financial challenges families face today. To help offset higher education costs, the Internal Revenue Service (IRS) has made several tax credits and deductions available to tax filers on their 2017 returns. However, your individual tax situation greatly determines which of these programs are available to you. 415 Group Senior Manager Carol Polatas, CPA, explains how taxpayers can take advantage of these breaks.
For so many of our clients, the cost of college tuition is a big part of their financial reality. However; for eligible taxpayers who meet income limits, the IRS has put provisions into place, such as tax credits and deductions, to help ease the burden of higher education expenses.
Selecting the right credit or deduction is one of the biggest ways you can take full advantage of these programs on your tax return. I’ve seen a lot of confusion when it comes to understanding how credits and deductions affect your tax picture. In most cases, I recommend taking a credit over a deduction. That’s because a tax credit is a dollar-for-dollar reduction to your tax bill, while a deduction only reduces the amount of income taxed.
But beyond choosing the right credit or deduction, it’s very important to understand who and what expenses are eligible for these programs. The IRS also disallows “double-dipping” or utilizing more than one tax benefit for the same educational expenses. For instance, if education expenses were paid from a tax-advantaged account, such as a 529 plan, then those expenses would be ineligible.
While these programs can be very beneficial, your specific tax situation determines your eligibility, which makes choosing the right one so important. That’s where I see 415 Group providing the most value. We know the ins and outs of these provisions, and we know how they affect your total tax picture.