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Newsletter |
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Help With
Education Costs
Virtually all taxpayers can now get help to pay for education costs.
Students and their parents can capitalize on a number of different
education benefits. For example, the maximum amount that can be
contributed to a Coverdell Education Savings Account (formerly an
Education IRA) each year is $2,000. Any family member with adjusted
gross income below $190,000 in a joint return or $95,000 in a single
return can contribute toward the $2,000 maximum annual addition to a
Coverdell account, where the contribution will grow, tax-deferred, until
withdrawn for any of a liberal list of education costs -- even private
elementary and secondary tuition. At higher income levels, the maximum
contribution is reduced.
State sponsored prepaid tuition plans (Section 529 plans) offer an
attractive way to accumulate money to pay higher education costs. Both
public and private institutions sponsor tuition savings plans. Parents,
Grandparents, or other interested parties typically contribute up to
$11,000 per year to such plans where income accumulates tax-free. Funds
withdrawn from Section 529 plans are totally free from federal income
tax if they are used to pay qualified higher education expenses.
Hope and Lifetime Learning credits are also available and several
funding sources can be coordinated in order to pay as many costs as
possible with tax favored dollars. An education expense deduction, for
up to $3,000 of education expenses that are not paid from a Section 529
plan or a Coverdell Account and don't qualify for the Hope or Lifetime
credit, is available for taxpayers with modest incomes. That deduction
is available whether the taxpayer itemizes deductions or not, but begins
to phase out at adjusted gross income levels in excess of $43,000
($87,000 on a joint return).
Planning education funding for yourself, your children, or your
grandchildren may involve coordinating five tax law provisions . . .
six, if you count the tax free redemption of Series E bonds to pay
higher education costs . . . and you might want some help. We have
studied these provisions and are prepared to assist you. Just give us a
call to arrange an appointment. |
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