Dec 4, 2008

Thank You, Uncle Sam!

Knowledge is the key to maximizing your tax savings. Taking a little time to research some tax credits could save you thousands of dollars. I must admit taxes can sometimes be very boring and complex. I'm not suggesting you go to the library and do hours of research. However, I suggest checking out the IRS website and asking your tax accountant simply questions throughout the year not just during tax season.

I would like to open your eyes to the world of Education tax credits. Yes, now I know I have your undivided attention. Hey, we pay thousands of dollars to fund a college education so we deserve it! Individual taxpayers are allowed a nonrefundable tax credit to offset the costs of post-secondary, graduate or vocational education. These education tax credits are known as the Hope Credit and the Lifetime Learning Credit.

1. The Hope Credit is a nonrefundable tax credit with an annual maximum of $1,500 for each student.

§ The credit is based on qualified expenses paid by the taxpayer for qualifying individuals enrolled for the first two years of a post-secondary degree or certificate program at an eligible educational institution on at least a half-time basis.

§ Qualified expenses are defined as tuition and fees required for the enrollment or attendance of the following individuals at eligible educational institution: taxpayer, spouse, or any dependent of taxpayer with respect to whom taxpayer is allowed s dependency exemption deduction.

§ Qualified expenses do not include the costs of room and board, insurance or other personal, living of family expenses, even if paid to the school.

2. The Lifetime Learning Credit is also a nonrefundable income tax credit calculated as a percentage of qualified expenses paid during the taxable year by the taxpayer, including post-graduate course work and courses to acquire or improve job skills.

§ Unlike the Hope Credit, this credit is based on the annual expenses incurred by the taxpayer for all members of the family.

§ This credit is allowed for an unlimited number of taxable years. The Hope credit is per student but the Lifetime Learning credit is per return.

§ A Lifetime Learning credit is not allowed against the expenses incurred for an eligible student for whom a Hope credit is allowed for the taxable year.

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