Category Archives: Tax Credits and Deductions

What Colleges Can You Afford?

As fall kicks into gear, students begin looking in earnest at colleges. Kids tend to focus on a few core aspects of colleges when creating and narrowing down a list: majors available, location, big vs small. Later in the school year, I get calls from panicked parents whose students have fallen in love with and often been accepted to wonderful Continue reading What Colleges Can You Afford?

Borrowing: Where to Start

I’ve probably said this before, but there are families staring down tuition payments for the first time right around now. Most families use a combination of savings, cash flow and borrowing to pay for college. The first two are reasonably straightforward; they’re yours, after all. Borrowing is more complicated, and chances are that if you have a high school student, you’re getting lots of mail about education loans that are available to you. Continue reading Borrowing: Where to Start

Can You Use a Roth IRA for College? Should You?

Today’s post is written by a fellow fee-only advisor, Greg Phelps, CFP®, CLU®, AIF®, AAMS®, of Redrock Wealth Management

Saving for a child’s college education is perhaps one of the most noble things a parent will ever do. It’s also one of the toughest financial goals to tackle, because similar to healthcare costs, college expenses have risen across the board at 5% per year. Continue reading Can You Use a Roth IRA for College? Should You?

Planning for College Cash Flow

Before you sign up, you have to figure out how you’re going to pay for college each year. The first step in figuring that out is confirming with the school what has to happen for your aid package to be renewed. Then, consider the additional costs that aren’t included in the award letter—travel to and from school, activities your student intends to participate in, spending money. With all of those items written down, you have a good sense of what you’ll actually spend each year. This may seem really elementary, but most Continue reading Planning for College Cash Flow

How America Pays for College

Sallie Mae’s annual How America Pays for College report has some good news: In the 2015-2016 school year, the average amount families spent on college went down slightly, to $23,688. The biggest decline came on spending for 2-year colleges; families with students in 4-year schools reported spending about the same as in the previous year. In Continue reading How America Pays for College

PATH Act and 529s

The PATH Act that went into effect in 2015 includes several changes pertinent to 529 plans. The big ones:

  • Computers, peripherals and Internet access are now qualified expenses. So add any money spent on those to what’s on your 1098-t.
  • People with multiple 529 accounts no longer need to aggregate them to determine how much is taxable earnings in the event of an excess withdrawal. Instead a single account can be used for that, as long as funds were withdrawn from that account.
  • In the event you receive a refund from a college– for example, you withdraw from a class– you can now redeposit that refund in the 529 account within 60 days for no penalty.

Continue reading PATH Act and 529s

Form 1098-t and the Academic Period

Tax time is upon us and with it, questions about form 1098-t. This is the form colleges use to report qualified expenses. The 1098-t is sent to any student who (or on whose behalf were) paid qualified education expenses.

Colleges can report expenses two ways: If the expense is reported in box 1, the college is Continue reading Form 1098-t and the Academic Period

Education Tax Credits

If your income is less than $180,000 (married filer) or $90,000 (single), you may be eligible for the American Opportunity Tax Credit while your student is in college. This is a credit of up to $2,500 annually, so nothing to sneeze at. Here’s the catch: You can only take the credit for expenses for which you did not use another tax benefit (i.e., for expenses paid Continue reading Education Tax Credits