<p>Sorry if this has been posted previously. I cannot figure out how to 'search' for a topic without going through the entire list !</p>
<p>I'll have a first time Freshman in college this fall. What do I need to know for Tax time? We do use an accountant but when I asked him questions while there last year, he seemed very vague & not sure he knew a lot. I'm considering a different accountant this year (First time in about 23 years !)but first would like to know some information myself to help me choose the best one.</p>
<p>I know the Hope and another exist. Some people say they help a lot , but iunless I'm reading it wrong, it's a very small amount in comparison to the total.</p>
<p>What can be deducted? Anything specific I should be aware of ? Tips? Things to consider?</p>
<p>The best would be the America Opportunity Credit which returns $2,500 based on $4,000 of costs. There are, of course, requirements and it may phase out at higher income levels. What you could do to see how it works is download free tax software, put in your numbers for last year, add college costs and see what you get back.</p>
<p>I prefer H&R Block at Home (formerly Tax Cut)
Also most programs help break down the cost with school. Remember to keep track of book costs, the amount of college tuition, how much YOU paid (though know scholarships, etc.). The school will send 1098 -T showing tuition generally. If you received scholarships for anything above tuition (for room and board) there are a few extra questions to ask. It is not a bad time to interview accountants or go to a place like H&R Block and Jackson Hewitt for big changes. If you go somewhere, just make sure you request a person that has many years experience and is of a higher level. The reputable places have to do 20-30 hours of training every year and are up of the changes with tax laws. Accountants have to do continuing education, but it doesn’t have to be taxes. If you don’t feel comfortable at the end, you can walk away without filing with them and pay nothing.</p>
<p>Thanks . I don’t think I am comfortable with Turbotax. We itemize and I am self employed. The majority of the forms are for my business. I like the confidence of a professional.</p>
<p>Is the Hope, Lifetime,or America deduction ALL you get? Seems like pocket change - we’re paying almost 100%. Still, it’s $2500, I guess. </p>
<p>Our bill is itemized quite well. It will be easy to seperate class fees, books, etc.</p>
<p>Can we deduct any of these things? Or is just the programs mentioned above?</p>
<p>The linked IRS publication 970 has info on tax benefits for education.
<a href=“http://www.irs.gov/pub/irs-pdf/p970.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/p970.pdf</a>
As far as I can tell, you can take a deduction of $4,000 for tuition if you didn’t qualify for an American Opportunity, Hope, or Lifetime Learning Credit and your Modified Adjusted Gross Income is below $80,000 (single) or $130,000 (married filing jointly).</p>
<p>Some states (New York) also have state income tax deductions. I rely on Turbo Tax to figure this stuff out for me.</p>
<p>This is an area that seems to change frequently so I suggest getting a knowledgable accountant rather than the one you’re using or use TurboTax or equivalent, and educating yourself as well (which is what you’re doing now). A couple of key points -
The amount that might be deductible or available as a credit is a drop in the bucket compared to what many pay for college. The entire cost of college isn’t deductible as some people (who aren’t actually paying for college) might think (unless the overall cost is very low). This seems to come as a surprise to many.</p>
<ul>
<li>The deductions/credits phase out with higher incomes so depending on your income you might get no help in this area.</li>
</ul>
<p>What state do you live in? In NY, money you contribute to a 529 is state tax deductible. It does not have to sit in the account for any amount of time - you just need to deposit it into the account and then pay a school bill from the account. Even if you weren’t in a position to save for college but are paying costs out of current income, you can benefit from this. </p>
<p>There may be similar provisions in other states - it pays to check.</p>
<p>Checkers… at the end of the tax year the school should send you a form 1098T. This is documentation of the amount that you paid to the school. It will definately include tuition, fees room and board. My sons school also includes any amounts that go through the student accounts, like books, computer etc. It does simplify the record keeping of the costs. </p>
<p>While there are only a few credits available and you are correct, in respect to tuition, it seems a small amount, but they are credits. CREDITS reduce your tax liability $ for $. Unfortunately, you can only use one credit each year. The Amer. opportunity credit is only good for the first two years of college and are only valid in 2009 and 2010 currently. So if you can use this one, try to, if it is more than the others, because as of right now… it will expire next year.</p>
<p>The other big difference is the income levels or AGI, adjusted gross income, that you can have. To get an idea, look at last years tax return and search out the AGI and compare to the income limits for each credit. DadX3 posted an invaluable link, download the publication and read through it. Then you will know based on AGI, if you are eligible.</p>
<p>Since you use an accountant, what I suggest is to get a folder and label it college expenses. Put EVERYTHING in it in support of your college expenses. Your can keep the bills and see what comes on the 1098 form, and then get rid of it, OR you can just have the accountant go through it and determine what is eligible for the credit, although the IRS publication does a great job. Folders and envelopes full of receipts are the reason I know longer do taxes!!!</p>
<p>^ Just a “word to the wise” on the 1098-T … do NOT rely on that form to faithfully reflect your payments during the tax year. As JerseyGirl suggests, keep a categorized record of your expenses … and check that against the 1098-T when you receive it.</p>
<p>I have used both Turbo Tax and H&R Block programs. They will give you filing information and copies of tax forms but will not provide answers to anything that is not in black and white especially related to deductibility issues. As education deductions have a form and anything not on the form can not be included and Dependent costs have very limiting conditions and only apply to college students in a minimal number of cases. If there is no specific form I have found the tax programs to be of no help and a CPA only helps determine the related risk when using misc deductions.</p>
<p>I will emphasize the book receipts. The school does send the 1099 which even if not completely accurate does have tuition, r&b etc. (plus you could always look at their online bill.) But when you buy books (especially if you buy them from multiple places when you’re comparing prices) you need to save your receipts so you remember how much you spent. I spent an hour pouring through credit card bills and piles of receipts just looking for the book costs. Won’t do that again!</p>