Ann Emery, CPA outlines the keys to valuable savings on college tuition costs:
The rising cost of college tuition can seem insurmountable. However, there are savings opportunities and planning strategies you can take advantage of, and your CPA has the knowledge to help! Here are three ways to make the cost of college tuition less cumbersome:
- Education Credits: Education credits are available for qualified tuition and/or related expenses. You can take an American Opportunity Credit of up to $2,500 or a Lifetime Learning Credit of up to $2,000. The American Opportunity Credit is 40% refundable, which means you can get a refund if the amount of the credit is greater than your tax liability. Both credits are phased out for higher-income taxpayers.
- Qualified Tuition Programs (Section 529 Plans): Parents and grandparents saving for college ahead of time have an opportunity to put money aside in a tax-advantaged plan. Section 529 plans have many advantages:
- Qualified withdrawals are free from federal tax, and the earnings are allowed to grow tax-free
- Grandparents can contribute, which benefits them by reducing their taxable estates
- The designated beneficiary of an account can be changed to another member of the family if necessary
- FAFSA (Free Application For Student Aid): Federal Student Aid is responsible for managing the student financial assistance programs. For Ohio residents, the Federal deadline for the FAFSA application is June 30, 2016. However, many colleges have an earlier deadline, so it’s important to ask college admissions representatives or check your target colleges’ websites to find that information. Also, you don’t need to have your 2015 tax return filed to complete the FAFSA application. You can submit the application with estimated numbers and update the application after your 2015 tax return is filed.
As you can see, there are options for reducing the sticker shock of college tuition. If you’d like to sit down and talk about your options, contact me to set up a meeting.