Five Reasons to Start Your Education Today
Often one of the most difficult college related challenges is the cost of tuition. Prospective students can withstand the nerve-racking experience of the admissions process but the bottom line is they think they can’t afford the expense of a higher education. This belief is becoming more of a myth as financial aid and scholarships are readily available. Many college candidates are simply unaware of all the options they have available to them. For instance, because the of The Taxpayer Relief Act of 1997, the cost of education can provide Los Angeles ORT students and their parents with a decent tax break, helping to ease the economic burden and pave the way for a bright future. Read below to learn the top five tax deductions that students overlook:
American Opportunity Credit
This tax credit could potentially be as high as $2,500 per student. The goal of this is to make post-secondary education more reasonably priced for the first four years of attendance. Depending on eligibility, income tax filers can receive 100% tax credit on the first $2,000 and 25% on the next $2,000 spent on education.
Lifetime Learning Credit
The Lifetime Learning Credit can help those students who were not eligible for the American Opportunity Credit. With a cap of $2,000, students or their families can claim 20% of the first $10,000, spent on a degree or certificate based education.
More often than not, to qualify for a tax break, tax payers are required to keep a detailed and tedious list of itemized deductions. Fortunately, the IRS allows a tuition deduction from one’s gross income of up to $4,000, regardless of itemized deductions.
Student Loan Interest Deduction
Most students at one time or another will have to take out a student loan to help cover part of the cost of their continued education. However, student loans almost always have low interest and the interest that is paid is another tax deduction for the borrower.
Withdrawals from IRAs
Students, or their parents, who have an Individual Retirement Account (IRA) can fund educational expenses from these accounts free of any penalty. The IRA withdrawal can be used for tuition, books, supplies or room and board. As long as the expense meets the requirements of the IRS the money can be taken out tax free.
In addition to tax breaks, it is important to remember that there are also scholarships, grants and student loans as possibilities for starting a post-secondary education. Contact an advisor at ORT to learn more and take that first step towards a new career.