The Salon on N ClarkTax Tips for College Parents
Semester 1 Done ✓
January Term Internship Done ✓
Laundry and Food Packed for Return to School ✓
Favorite Home Cooked Meal Served ✓
Car Gassed Up ✓
Last Deep Breath Because You Will Miss Your Kid ✓
Just when it seems you have everything in order as your child heads back to college, you remember it is TAX TIME! With the high expense of a college degree, parents need all the help they can get to manage the costs.
- The IRS is there to help, but do you know the ins and outs of what is available?
You can begin with the wealth of information on the IRS site: https://www.irs.gov/publications/p970/.
- Unsure if you are eligible?
This tool can let you know: https://www.irs.gov/uac/Interactive-Tax-Assistant-(ITA)-1
- Are there other possibilities?
Here is a detailed list: https://www.irs.gov/uac/Tax-Benefits-for-Education:-Information-Center
Prepaid plans offer nice tax incentives. As is the case with 529 college savings plans, funds stored in prepaid plans are exempt from federal income tax if the plan holder uses them for qualified education expenses.Depending on your state’s regulations, consumers invested in a prepaid tuition plan may also get a state tax deduction as well. (www.bankrate.com)
What about Financial Aid Grants and Scholarships?
If the money is directed to the student, it is considered student income. If the amount exceeds the student’s educational expenses, the student will have to report the excess funds as taxable. Also taxable are funds used for room and board, travel, and discretionary purchases. It’s important to save all paperwork (receipts, invoices, etc.) to prove the non-tax and taxable parts of the monies.
| Four Additional Tax Break Options:
Where do I Find the 1098-T Tax Information Form?
The 1098-T, Tuition Statement, is used to help figure education credits for qualified tuition and related expenses paid during the tax year. For more detailed information on this form: 1098-T . Most colleges make the form available on their website in the student’s portal.
I Co-Signed my Child’s Student Loan. Who Claims the Loan on Their Taxes?
Be sure to coordinate who will claim the loan, as only one of you is permitted. If you are making the payments, consider yourself the claimant. Here is an example from TaxTalk: (Student Loan Payments).
Finally, here is a great article you can share with your child on Tax Tips and Myths, which includes a primer for beginners: Tips and Myths.
Filing taxes can be stressful and confusing, but rest assured it happens only once a year, and with the information provided above, you will be well-armed to succeed!