Tax season: tax tips for college parents
If you are a college student or parent, I would not be surprised if you filed your tax returns six weeks ago.
Why? Because you need financial information from your federal tax returns to file the Free Application for Federal Student Aid. And March 1 was the deadline for many of the financial aid programs that Monroe County students are eligible for.
Yes, you can file FAFSA with estimated tax figures and provide amended information later. Some families who participated in the College Goal Sunday program Feb. 10 at Monroe County Community College did just that.
I decided it wasn’t worth my time to fill out paperwork twice, and wanted all our financial figures correct from the start. I arranged to get our taxes done as soon as the IRS was able to accept our returns, and filed FAFSA and all the other paperwork well before the March 1 deadline.
Now, if you are just now starting to work on your 2007 tax returns, there are college tuition credits that you may be able to claim. But it’s a tricky set of calculations. Even my tax preparer was surprised when she ran the numbers. She got us a bigger tax refund than first expected when she took the time to compare all the options.
Daniel Wansten, president and founder of Professional Education Services, a college financial aid consulting firm in Grand Rapids, recently sent out a press release that was listed with other tax information on page 7A of the print and e-editions of The Monroe Evening News. If you missed the article, here are his tips:
When the Economic Growth and Tax Relief Reconciliation Act was passed several years ago, it turned a complicated situation into something even more complex. Following are a few points families of college students should consider when filing their taxes this year:
Withdrawals from qualified state tuition programs, such as Section 529 plans, are now tax-free. This provides greater control for the owner of such plans.
Coverdell ESAs (education IRAs) are bigger. Beneficiaries younger than 18 can receive up to $2,000 a year with a tax deduction for contribution.
With a Hope Credit, parents are eligible to receive a 100 percent tax credit on the first $1,000 of each child’s tuition fees for the first two years and a 50 percent credit for the next $1,000 worth of expenses in the same period.
Deductions for the interest paid on qualified student loans were raised to $2,500. Those earning more than $50,000, or $100,000 for joint filers, are ineligible for the full $2,500. This deduction is not available for those whose income exceeds $65,000 or $130,000 for joint filers.
Timing is crucial. Pay a tuition fee too early and you could find yourself unable to claim a tax credit.
Receiving one tax credit may make you ineligible for another. If you’ve paid for expenses with money pulled out of a 529 Plan, you cannot earn a Hope Credit.
Tax benefits received will impact your expected family contribution (EFC), the amount of money the family is expected to contribute for the year toward the student’s cost of attendance. This figure is compared to the cost of attendance to determine a student’s aid eligibility.
Posted: April 2nd, 2008 under College, Taxes.
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