Wednesday’s Parent: Beating the double whammy of taxes and college costs

Double whammy of taxes and college costs. Photo by Wendy David-Gaines

Double whammy of taxes and college costs. Photo by Wendy David-Gaines

The double whammy is hitting many college-bound families who are filing their federal and state taxes while dealing with the college bill. Both taxes and college costs are hard to figure out. Estimates can be way off and opportunities to get money back are often missed. Reuters and Money explain how this happens with tax credits and deductions and I’ll point out other pitfalls impacting college costs so you can be prepared to beat the double whammy.

The bottom line concern is many don’t receive what they are entitled to. Often that’s because parents and students don’t know the tax benefits exist, make incorrect choices, or wrongly don’t believe they are eligible. Still, it’s shocking that so many are letting money fly out the window.

“Only 42 percent of those polled in a Sallie Mae survey, ‘How America Pays for College 2014,’ said they used available tax breaks to help reduce college costs,” according to Reuters.

Read the full article and IRS Publication 970 to see if you qualify now or may in the future for the

  • American Opportunity Credit
  • Lifetime Learning Credit
  • Tuition and fees deduction
  • Student loan interest deduction

Beware some college-related expenses may not be counted in the above credits or deductions. Also, some things may raise income or affect the ability to get the maximum tax benefits like

  • Forgiven/cancelled loan
  • Scholarships

Read my Getting a student loan? Check out forgiveness programs which mentions the forgiven/cancelled loan amount might be considered income for tax purposes. Scholarships are usually tax-free if used for tuition and fees but what about if they pay for books and living expenses? Read Money to find out how to maximize the tax benefits when receiving a generous financial aid award, have low tuition, have a 529 plan, and when taking out large loans.

Doing the research is time-consuming but knowing your efforts may be well rewarded makes it worthwhile.

Read Suzanne’s post: Tax Filing Tips for Parents

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Wednesday’s child may be full of woe but Wednesday’s Parent can substitute action for anxiety. Each Wednesday Suzanne Shaffer and I will provide parent tips to get and keep your student on the college track. It’s never too late or too early to start!

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