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Higher Education Expenses Getting You Down?
Author: Nancy Sheerin  | Posted: 04-04-2008 | Comments: 0 | Views: 29 | Rating: (57)  (?) 
DATELINE: NEWTON, MASS...
Rodman & Rodman, P.C., Certified Public Accountants and Business Strategists, advises taxpayers on how to determine their eligibility for higher education expense deductions.
Taxpayers who have just finished grad school or are paying their child’s college tuition may be able to claim a deduction for the cost of tuition and fees for enrolling or attending college or graduate school.
Rodman & Rodman has outlined criteria for those who are looking to deduct higher education expenses for themselves, their spouse, or their dependents.
For married couples filing jointly: A deduction of up to $4,000 annually of qualifying expenses (defined below) may be taken if their adjusted gross income (AGI), with certain modifications, doesn't exceed $130,000 for the year ($65,000 for unmarried taxpayers). If modified AGI is above $130,000 ($65,000 for unmarrieds) but not above $160,000 ($80,000 for unmarrieds), up to $2,000 of qualifying expenses will be deductible. No deduction will be allowed if modified AGI exceeds $160,000 ($80,000 for unmarrieds). Married taxpayers must file jointly to claim the credit; it isn't available for married taxpayers filing separately.
For a taxpayer who can be claimed as a dependent: The taxpayer who can be claimed as a dependent does not qualify to claim this deduction. In the case of a dependent child attending college, the parent's expenses for the child can qualify under these rules, but not any expense the child pays for himself or herself. If you're claiming a deduction for expenses incurred on behalf of another individual, that individual's name and social security number must be included on your return.
What are Qualifying Expenses?
Expenses that qualify for the higher education deduction are essentially those for tuition and enrollment or attendance-related fees, but not the cost of books, room and board, student activity fees, athletic fees, insurance, transportation costs, or other personal expenses. To qualify, the expense must be in connection with enrollment during the year for which the deduction is claimed, or in connection with an academic term beginning within the first three months of the following year.
The deduction will be "above the line” meaning, it will be taken in arriving at AGI, will therefore be available even if you don't itemize, and won't be subject to reduction the way itemized deductions are. And, it will be allowed for alternative minimum tax (AMT) purposes.
It’s important to note that the higher education deduction isn't available for expenses incurred for an individual if the Hope or Lifetime Learning credit is claimed with respect to that individual for the year. In addition, amounts received for certain scholarships and other tax-free educational assistance payments are subtracted. Qualifying expenses may also have to be reduced when U.S. savings bonds have been used for higher education expenses, and on distributions from qualified tuition programs (also known as 529 plans) or Coverdell education savings accounts (also known as Coverdell ESAs).
A certified public accountant can help you figure out your qualifying expenses and if applicable, compare tax savings available to you from several different tax benefits to determine which is the best one to use.
Rodman & Rodman, P.C.
Founded in 1961, Rodman & Rodman, P.C. provides accounting, tax and business services to small and medium-sized companies throughout New England. With a focus on strategic planning, Rodman & Rodman goes beyond traditional accounting services and takes a proactive approach when serving clients to increase, preserve and sustain clients’ financial net worth.
From business valuations, taxation, audits, fraud detection and prevention services and succession planning to a variety of accounting IT services including software selection, implementation and training, the team at Rodman & Rodman serves as comprehensive advisors to clients. For individual clients, the company offers personal advisory services such as planning for real estate transactions, obtaining financing, estate planning and retirement planning as well as planning for college education. Rodman & Rodman Certified Public Accountants are located at 3 Newton Executive Park in Newton, Mass. For more information, visit their website at www.rodmancpa.com or contact Jen Reading at (617) 965-5959.
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