07 Apr Taxes & School- How To Save Money?
[divider]Tax Benefits for Attending an Online College [/divider]
There are a couple of tax breaks for students attending an eligible educational institution, which the IRS defines as any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. Your school should be able to tell you if it qualifies as such.
The Hope Credit allows you to claim up to $1,650 per tax year for qualified education expenses for each eligible student, which can include tuition and fees, books and supplies, and room and board. This credit may be taken only for the first two years of postsecondary education, and the student must be pursuing an undergraduate degree or other recognized education credential. Additionally, the student must be enrolled at least half time for the academic period.
Lifetime Learning Credit
The Lifetime Learning Credit allows you to claim up to $2,000 per tax year for qualified education expenses for all students enrolled in an eligible education institution. This credit is available throughout the student’s college career and can even be applied for courses taken to improve job skills. With this credit, a student does not have to be pursuing a degree and must be enrolled in at least one course for the academic period.
Student Loan Interest Deduction
If your modified adjusted gross income is less than $70,000 ($140,000 if filing a joint return), there is a deduction for interest on a student loan used for higher education. You can reduce your taxable income by up to $2,500.
Tuition and Fees Deduction
This deduction can reduce your taxable income by up to $4,000; however, if you claim this deduction, you will not be able to take the Hope Credit or the Lifetime Learning Credit.
The key is to research which option will earn you the most money on your taxes. Check out Publication 970 (Tax Benefits for Education) on the IRS website for more details regarding eligibility.
[divider]The Benefits of Student Loan Consolidation [/divider]
In a perfect world, every student would be able to graduate from college, find work quickly, collect a huge salary, and pay off student loan debt with all of that newfound cash. Unfortunately, life may have other plans for you like graduating, finding your dream job (halfway across the country), relocating, buying a house, marrying, having children, buying a bigger car, and the list goes on and on. Before you know it, you’re out of school and have envelope after envelope popping up in your mailbox requesting payment for this loan and payment for that loan. Just the paperwork alone is overtaking your life, not to mention the fact that all of those small monthly payments sounded great when you were getting each loan. Now that you’re adding up the monthly payments, you realize that you could be paying for a new car with all the money you’re sending out.
Lower Monthly Payments
A consolidation loan combines all of your federal loans into one with lower monthly payments.
Flexible Repayment Programs
Many consolidation loans offer flexible repayment options, which allow you to determine what will be most comfortable for your monthly budget.
Fixed Interest Rate
The interest rate for consolidating federal student loans is a weighted average of the interest rates of all the loans and does not change throughout the life of the loan.
Improved Credit Score
If you’re having trouble paying the high monthly payments on several loans, this could negatively affect your credit rating. By consolidating your loans, you can cut your monthly payment a great deal and stop missing payments.
Easier to Organize
Having only one loan instead of several just makes sense as far as paperwork and remembering payments is concerned. Simplify your monthly bill paying.
The interest on many educational loans is tax deductible.