college - Herman & Co. CPA

College Students: The Gray Area of Exemptions

There’s still time to take advantage of last-minute, tax-saving moves for dependency exemptions. For 2014, there are bigger dependency exemptions, as well as rules that, in some cases, are dauntingly complex.

Education Expenses FAQs

There is a limited deduction allowed for higher education and related expenses. In addition, business expense deductions are allowed, without a dollar limit, for education related to the taxpayer’s business, employment included.

Taxes on College Savings Accounts

In recent years, parents have lent an ear to a similar tune: Take the reins of any and every type of tax-advantaged savings account in order to save for your children’s enormous college bills. The message has resonated very clear. A majority of families are now saving for college using on average two types of college savings vehicles.

Higher Education Costs Continue to Escalate

Public four-year colleges are up 4.8% (to an average of $8,655) from last year for in-state tuition and fees. Public four-year colleges are up 4.2% (to an average of $21,706) from last year for out-of-state tuition and fees.

Coverdell Savings Accounts

The total contributions for the beneficiary (who is under age 18 or is a special needs beneficiary) of this account in any year cannot be more than $2,000, no matter how many accounts have been established.

American Opportunity Credit Helps Pay for First Four Years of College

More parents and students can use a federal education credit to offset part of the cost of college under the American Opportunity Credit. Income guidelines are expanded and required course materials are added to the list of qualified expenses. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.

Tax Breaks for Families and Students

Recent legislation made permanent or extended several tax breaks for families. In addition, several education breaks were made permanent or extended.