A reader asked the question, “Can I use funds in my 529 plan to pay for college application fees, tests or test preparation?” Unfortunately the answer is no. Though all of those are both costly and necessary, they are not “qualified education expenses” that are eligible to be paid for by 529 plan funds. In Publication 970, the IRS spells…
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Tax Credits and Deductions
One piece of good news with student loans: The interest you pay on them may be deductible. The Student Loan Interest Deduction gives eligible taxpayers a deduction for interest paid on qualified student loans. That’s pretty straightforward, but there are a couple of nuances: – A “qualified student loan” is one that’s used exclusively to pay for qualified higher educational…
Tax time is as good a time as any to discuss education tax credits. The federal tax code provides two primary tax credits, the American Opportunity tax credit (formerly the Hope Scholarship) and the Lifetime Learning Credit. There are slight differences in each, and depending on a family’s circumstances, one or the other may be more beneficial. You can claim…