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Category Archives: Education Planning

Student Loan Debt – Paying and Avoiding It, Plus Tax Benefits

Lake Wylie Tax Service | Bookkeeping | Payroll Service Posted on June 23, 2022 by Lake Wylie Tax Services StaffJune 23, 2022

Student Loan DebtDespite recent rounds of forgiveness for thousands of borrowers, nearly 43 million Americans are responsible for roughly $1.6 trillion in federal student loans which results in a significant long-term burden for students after graduation. The average debt varies by state from $28,600 in North Dakota to $54,900 in the District of Columbia.

Although the U.S. Department of Education has, as a COVID-19 pandemic relief measure, currently suspended loan payments, reduced the interest rate to zero and stopped collections on defaulted loans, all that is scheduled to end after Aug. 31, 2022. Unfortunately, it is time start thinking about how to deal with the resumption of payments and interest charges

This article looks at the issue of student loan debt from an income tax perspective including…

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Posted in Education Planning | Tagged College

Congress Adds More Uses for College Savings Plans (Sec 529 Plans)

Lake Wylie Tax Service | Bookkeeping | Payroll Service Posted on February 18, 2020 by Lake Wylie Tax Services StaffFebruary 18, 2020

More Uses for College Savings Plans (Sec 529 Plans)Congress originally created the Qualified State Tuition Plan, often referred to as the Sec 529 Plan, as a tax-beneficial incentive for parents, grandparents, and others to save money for an individual’s future college tuition and fees. There is no federal tax deduction for making contributions, but taxes on the earnings within a plan are not only tax-deferred while they are held in the account, they are tax-free when withdrawn to pay for qualified education expenses. Thus, the real tax benefit of these plans is the earnings within the plan accumulating tax-deferred and then being tax-free when withdrawn if used for college tuition and related qualified expenses.

Since originating these plans, Congress has continued to modify the purpose of the plans by allowing plan funds to be used for more than just college tuition and fees. Over the years, they have allowed plan funds to be spent on additional expenses, including books, supplies, equipment, reasonable room and board, and computer technology.

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Posted in Education Planning | Tagged 529 College Savings Plans, College

Above-the-Line Education Tax Deduction Reinstated

Lake Wylie Tax Service | Bookkeeping | Payroll Service Posted on January 21, 2020 by Lake Wylie Tax Services StaffJanuary 23, 2020

Education Tax Deduction Reinstated
Looking back a few years, a taxpayer who had higher education expenses could generally take advantage of four* possible tax benefits: an itemized deduction if the education was job-related, a higher education tuition and expenses tax credit using either the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Tax Credit (LLC), or an above-the-line deduction for higher education tuition and fees. However, the 2017 tax reforms did away with the itemized deduction through 2025, and Congress allowed the above-the-line deduction for higher education tuition and fees to expire at the end of 2017, leaving only the two education credits as options.

As part of the Appropriations Act of 2020, Congress has retroactively reinstated the above-the-line deduction for 2018 through 2020.

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Posted in Education Planning | Tagged Tax Credit, Tax Deduction
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