What You Should Know about Changes in Education Provisions in the Tax Law
The IRS has several provisions for helping families offset the cost of education through education tax credits. Are you making the most of tax benefits designed to offset some of the high costs of education?
The American Opportunity Tax Credit, extended through 2017, provides a tax break of up to $2,500 for qualified college expenses. The Act also made permanent several education-related tax options, including a $2,000 maximum contribution amount for Coverdell education savings accounts, which can be used to pay certain elementary, secondary and post-secondary expenses.
This year, we’ve seen a sharp increase in the number of taxpayers who were audited for education credits and related expenses. Record keeping is essential in this area! We can’t stress that enough. What kinds of documentation should you save?
- Receipts for tuition payments – make sure you’re keeping screenshots or paper receipts for tuition payments you make
- Receipts for books and “non-institutional expenses” – this is anything that you paid for outside of tuition and fees that you want to report to IRS
- Form 1098 – these are received from colleges or educational institutions and they are critical for us to see at tax time
Given the many changes, we can help you make sense of the benefits available to you and ensure you’re taking full advantage of them. We can also offer advice on smart steps for financing the high cost of education, so please contact our office with all your questions.
And, in case you missed them, see this helpful past post on the options for financial aid. Learn about the different types of loans and scholarships available to you or your student. This post on avoiding mistakes during your financial aid application is super helpful, too! You don’t want to make a silly mistake and jeopardize your chance to maximize financial aid.