Filing income tax returns is a nearly universal experience for Americans. The approach to this often stressful event varies from person to person. Some self-reliant people jump right in, using government provided forms, scratch paper and a calculator to complete their taxes by hand. Other people, who have the same self-reliance, but who find a little help to be comforting, use a tax software program to calculate their taxes. Others prefer to pass this task on to others, hiring an accountant or tax consultant to do their taxes for them. Which ever way you choose to do your taxes, it is important that you are aware of the many tax deductions you can legally take. Knowledge of these can save you hundreds of dollars.
The majority of taxpayers will use write offs on the their taxes, which the IRS tells us, came to more than $842 billion in 2205. That was the most ever claimed. Still, there remain even more tax exemptions that many people don't know about and could be claimed.
Get Smart - Take the Tax Credit
It may be possible, if your income falls within certain stated guidelines, to use education-related expenses as a credit against your tax liability. Available options include the Lifetime Learning credit, which permits you to receive a tax credit for the amount of your tuition, and the Hope credit. You can make your education more affordable if you'll devote some study time to possible tax alternatives.
According to a government report written in 2005, which surveyed and included information from almost 1.5 million citizen's tax returns, of the people who were entitled to the Hope or Lifetime Learning grant, as many as 1 in 4 people did not take advantage of it. This works out to an average of $160 per person, but in some cases it was as high as $500 in surplus taxes!
Single persons earning less than $57,000 (or married-filing-jointly households earning less than $114,000) are eligible for the Hope credit to get their college tuition partially paid for. Note that the Hope credit does not cover books, supplies or housing. The Hope Credit has two separate programs, one of which provides up to $1,650 for tuition or expenses related to tuition, and the other provides up to $2,000 towards expenses related to getting your college education.
You do not have to itemize to take advantage of the deduction for tuition and education related fees which can be worth as much as $4000 to you. Your MAGI, if you are single, $65,000 or less (married-filing-jointly is double that or $130,000). You can still take advantage of as much as a $2000 in tax deductions if you income, as a single person, is between $65,000 and not more than $80,000 (again it will be twice those amounts if you are married-filing-jointly). If your income is any higher than these figures you are not going to be eligible for college tax deductions.
In terms of tax credits and deductions, complexity is the rule of thumb, and this instance is no different. Tax filers are not allowed to claim both the credit along with the tuition deduction simultaneously. Thus, it is to your advantage to research which is greater; however credits are typically more valuable than deductions. It is crucial to research this since alternatives such as phase-outs might impact your case.
About the Author:
Learn How to claim tax deductions for mileage and other hidden Tax Deductions and Credits that can save you gobs of cash. Ron Finkelstein is NOT an accountant or Tax Attorney. He is merely a small business owner who has paid a lot of money over the years to learn a whole lot about Taxes and Time Management. Make sure you understand the Standard vs. Itemized deductions
