Tax Benefits of Education

1. Tax Benefits of Education Circular 230 Disclaimer Any tax advice contained in the body of this presentation was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

2. Education Expenses Included • Tuition • Fees • Required Books • Required Supplies Excluded • Room • Board • Travel • Personal Expenses

3. Tuition Deduction • Income Phase-out $65,000-$80,000 and $130,000-$160,000 • Unlimited Years and no degree requirement • Adjustment $1/$1 up to $4,000

4. Lifetime Learning Credit • Income Phase-out $53,000-$63,000 and $107,000-$127,000 • Unlimited Years and no degree requirement • .20/$1 up to $10,000 • $2,000 Nonrefundable

5. American Opportunity Credit • Income Phase-out $80,000-$90,000 and $160,000-$180,000 • First Four Years Only and must be Pursuing a Degree • $1/$1 up to $2,000 then .25/$1 for next $2,000 • $1,500 Nonrefundable, $1,000 Refundable

6. Single Parent with 2 Children Total Income $35,000 Adjusted Gross Income $35,000 Taxable Income $14,050 Total Tax $1,470 Total Payments $2,828 Refund $1,358

7. Tuition Deduction Total Income $35,000 Tuition Deduction $4,000 Adjusted Gross Income $31,000 Taxable Income $10,050 Total Tax $1,050 Total Payments $2,828 Refund $1,778 Tax Benefit: $420

8. Lifetime Learning Credit Total Income $35,000 Adjusted Gross Income $35,000 Taxable Income $14,050 Non Refundable Credit $1,470 Total Tax $0 Total Payments $2,828 Refund $2,828 Tax Benefit: $1,470

9. American Opportunity Credit Total Income $35,000 Adjusted Gross Income $35,000 Taxable Income $14,050 Non Refundable Credit $1,470 Total Tax $0 Refundable Credit $1,000 Total Payments $3,828 Refund $3,828 Tax Benefit: $2,470

10. Comparison • Deduction – Refund $1,688 • Deduction – Benefit $420 • LLC – Refund $2,828 • LLC – Benefit $1,470 • AOC – Refund $3,625 • AOC – Benefit $2,470

11. Other Tax Benefits Prepay (Save) • Qualified Tuition Programs (529) • Coverdell Education Savings Account Pay • Penalty Free IRA Distributions • Tax-Free Savings Bond Redemptions Repay • Tax-Free Student Loan Repayment Assistance • Student Loan Interest Deduction Don’t Pay • Tax-Free Student Loan Cancelation • Tax-Free Scholarships and Grants (Most of the time) • Tax-Free Employer Assistance

12. MA State Tax Provisions Tuition Deduction Exceeds 25% of AGI Undergraduate Only Tuition and Fees Only Student Loan Interest Undergraduate Only No Limit

13. Key Documents 1098-T (Tuition Statement) 1098-E (Student Loan Interest) Copy of Bill Copy of College’s “Budget”

14. How to File • IRS Free File Options • VITA – Worcester State College • Branded Tax Software • Fillable Forms • MA DOR WebFile (Free)

15. Resources IRS for College Students IRS Education Credit Comparison Chart MA DOR Education Deductions

16. Thank You!