Back-to-School Tax Tips for Students and Parents

Here is a word from the Goodfellas at the IRS:

IRS Summertime Tax Tip 2013-19

Going to college can be a stressful time for students and parents. The IRS offers these tips about education tax benefits that can help offset some college costs and maybe relieve some of that stress.

• American Opportunity Tax Credit. This credit can be up to $2,500 per eligible student. The AOTC is available for the first four years of post secondary education. Forty percent of the credit is refundable. That means that you may be able to receive up to $1,000 of the credit as a refund, even if you don’t owe any taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment. A recent law extended the AOTC through the end of Dec. 2017.

• Lifetime Learning Credit. With the LLC, you may be able to claim up to $2,000 for qualified education expenses on your federal tax return. There is no limit on the number of years you can claim this credit for an eligible student.

You can claim only one type of education credit per student on your federal tax return each year. If you pay college expenses for more than one student in the same year, you can claim credits on a per-student, per-year basis. For example, you can claim the AOTC for one student and the LLC for the other student.

You can use the IRS’s Interactive Tax Assistant tool to help determine if you’re eligible for these credits. The tool is available at IRS.gov.

• Student loan interest deduction. Other than home mortgage interest, you generally can’t deduct the interest you pay. However, you may be able to deduct interest you pay on a qualified student loan. The deduction can reduce your taxable income by up to $2,500. You don’t need to itemize deductions to claim it.

These education benefits are subject to income limitations and may be reduced or eliminated depending on your income.

For more information, visit the Tax Benefits for Education Information Center at IRS.gov. Also, check Publication 970, Tax Benefits for Education. The booklet’s also available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

IT'S COMING......

Don't be a Drop Out: IRS Helps With FAFSA

Now a good friend of mine
Sat with me and he cried
He told me a story
I know he ain't lying

Said he went for a job
And Mr. Man said
Without an education
You might as well be dead

Automated IRS System Helps College-Bound Students with Financial Aid Application Process

College-bound students and their parents typically want to make every dollar and every minute of the college experience count including money spent on tuition and time spent on the college financial aid application process. The Internal Revenue Service is helping minimize the time spent on the completion of the Free Application for Federal Student Aid (FAFSA) form by automating access to federal tax returns with the IRS Data Retrieval Tool. This tool provides the opportunity for applicants to automatically transfer the required tax data onto the FAFSA form.

Here are some tips on using the IRS Data Retrieval Tool:

• Benefits The IRS Data Retrieval tool is an easy and secure way to access and transfer tax return information directly onto the FAFSA form, saving time and improving accuracy. Also, the increased accuracy reduces the likelihood of being selected for verification by the school’s financial aid office.
• Eligibility Criteria Taxpayers who wish to use the tool to complete their 2012 FAFSA form must:
  • have filed a 2011 tax return;
  • possess a valid Social Security Number;
  • have a Federal Student Aid PIN (individuals who don’t have a PIN, will be given the option to apply for one through the FAFSA application process);
  • have not changed marital status since Dec. 31, 2011.
• Exceptions If any of the following conditions apply to the student or parents, the IRS Data Retrieval Tool can not be used for the 2012 FAFSA application:
  • an amended tax return was filed for 2011;
  • no federal tax return for 2011 has been filed ;
  • the federal tax filing status on the 2011 return is married filing separately; a Puerto Rican or other foreign tax return has been filed.
• Alternatives If the IRS Data Retrieval Tool can not be used and if the college requests verification documentation, it may be necessary to obtain an official transcript from the IRS. To order tax return or tax account transcripts, visit www.irs.gov and select Order a Transcript or call the Transcript toll-free line at 1-800-908-9946.