How To Garner Tax Benefits From Your Education ... - Financial Press

Filing income tax returns is a task that faces most people on a regular basis. Using a software program at home or paying tax professionals to prepare the tax return are the commonest ways to do your taxes. You can also fill out the relevant government form and mailing it back. How you file your taxes is important, but even more significant is your knowledge of the tax deductions you are allowed. This knowledge is the key to saving money when filing taxes.

Most taxpayers will claim their exemptions which, according to the IRS, came to over $842 billion in 2005, and were the largest value ever claimed. There are many overlooked and legal tax perks that more people could take advantage of.

Get Smart. There are guidelines, depending on your income, that will allow your expenses related to getting and education can be used to as a tax credit. The Lifetime Learning credit allows you to use your tuition as a credit; the Hope credit is another option. Getting smart is to your benefit in all ways.

Out of all the citizens that were eligible for the Hope or Lifetime Learning allowance as many 25% did not take advantage of it; accord to the Government report issued in 2005 which included data from about 1.4 million tax returns. On an individual basis this was only somewhere around $160 per person, but some of those same people paid an average of $500 in surplus taxes!

You can receive help in paying part of your college tuition through the Hope credit. You can get as much as $1,650 for tuition, or costs related to tuition, depending on your income (housing, supplies, or books are not included). If you attended an approved college, the Lifetime Learning credit allows as much as $2,000 toward education-related expenses. Since, for both programs, your income is taken into consideration, you may not be eligible if your income level is too high. However, both programs allow generous allowances and are based on your modified gross adjusted income. For taxpayers filing singly, that means making less than $47,000 a year. For those filing as married-filing-jointly, the amount increases to those making less than $94,000 a year. For those taxpayers making more than $47,000 (single) or $94,000 (married-filing-jointly), you may be still eligible for a reduced amount. If you earn more than $57,000 MABI (or double that amount for those filing jointly), you are not eligible for either credit

You do not have to itemize to take advantage of the deduction for tuition and education related fees which can be worth as much as $4000 to you. Your MAGI, if you are single, $65,000 or less (married-filing-jointly is double that or $130,000). You can still take advantage of as much as a $2000 in tax deductions if you income, as a single person, is between $65,000 and not more than $80,000 (again it will be twice those amounts if you are married-filing-jointly). If your income is any higher than these figures you are not going to be eligible for college tax deductions.

In terms of tax credits and deductions, complexity is the rule of thumb, and this instance is no different. Tax filers are not allowed to claim both the credit along with the tuition deduction simultaneously. Thus, it is to your advantage to research which is greater; however credits are typically more valuable than deductions. It is crucial to research this since alternatives such as phase-outs might impact your case.

Ron Finkelstein is
NOT a tax lawyer or a Certified Public Accountant. He is
plainly a entrepreneur that?s
forked out too much money throughout the years in order to understand tax tips like the difference between tax avoidance and evasion and the Top 5 overlooked tax credits

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Source: http://www.thefinancialpress.com/2012/02/18/how-to-garner-tax-benefits-from-your-education-spending/

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