If school hasn't started in your area yet, it soon will.
For many families, classes resume at college. And with higher education costs going up every year, students and their parents who help foot most of or the entire school bill are always on the lookout for any available assistance.
Students enjoying being back at the College of DuPage Glen Ellyn, Illinois, campus. Photo courtesy College of DuPage Newsroom via Flickr.
Uncle Sam is among those who can help. As this week's Weekly Tax Tip details, there are several education-related tax breaks to help with almost every school situation.
They range from 529 savings plans and Coverdell accounts to a deduction for student loan interest and tax-free interest on savings bonds used to cover education expenses.
Two education tax credits: Then there are two tax credits to help cover class work.
As long-time readers know, credits generally are better tax breaks because they reduce your tax bill dollar-for-dollar.
The American Opportunity tax credit (AOTC), renewed through 2017 as part of so-called fiscal cliff tax bill, could net qualifying college students or their bill-paying parents a $2,500 credit.
Some could even get another $1,000 back as a refundable credit, meaning the Internal Revenue Service will send you the money even when you don't owe any tax.
The Lifetime Learning tax credit is available, as the name indicates, for schooling costs at any time. It's worth a possible $2,000 credit.
Tuition and fees deduction status unclear: One education tax break, however, is in limbo for the 2014. The tuition and fees deduction is part of the extenders package, those tax laws that expire periodically and must be renewed by Congress.
This tax write-off, one of the above-the line deductions available without having to itemize on Schedule A, expired at the end of 2013.
The Senate wants to keep the tuition and fees deduction (and more than 50 other extenders) in place as is through 2015.
The House, however, has fiddled with some extenders, including several education tax breaks.
H.R. 3393, which was approved by the Ways and Means Committee on June 25, proposes to combine many current school tax benefits into a new, permanent American Opportunity tax credit.
As part of that process, the existing AOTC's provisions would be merged with the Hope credit (which AOTC temporarily replaced in 2009), the Lifetime Learning credit, and the tuition and fees above-the-line tax deduction.
What will happen with these various education tax credits? Will the House desire to consolidate educational tax benefits prevail?
Or when a lame duck Congress convenes after the November election, will the short time frame to get work done mean Congress will go along with the Senate's extenders-as-usual approach?
Or will all the extenders, including the tuition and fees tax break, finally die?
IRS working on forms: We must wait and see. But in the meantime, the IRS is pushing ahead with its work, revising tax forms for the 2014 tax year.
One of the forms that is in the update process is Form 8863, which you must file to claim the education tax credits.
Click image to open the full draft Form 8863 in PDF version.
If things change — and the way Congress works (using that word loosely) that's a pretty good bet — the IRS will have to tweak this form some more.
But at least it's got a head start on the process.
You, too, should be looking into what tax help is available for you and your students as soon as possible. Knowing what educational tax breaks are out there and which ones you qualify for can help you put together an overall college financing strategy.
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