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Personal Finance

We are dedicated to keeping clients abreast of the latest developments and tax-saving strategies. This section includes a library of hundreds of timely articles about business, taxes, finances, trends and the like. The articles are categorized by subject matter, which can be accessed from the links. Click on your topic of interest and find a wealth of information.

TAX BREAKS FOR EDUCATION & STUDENT AID INFORMATION

This section is provided to assist clients in the various aspects of post-secondary education planning including tax benefits, aid programs, educational savings programs, etc.  We encourage you to call for an appointment so that we can help you plan for your children’s education.

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Above-The-Line Education Deduction
Through 2013, taxpayers are allowed up to a $4,000 above-the-line deduction for qualified higher education tuition and related expenses. Unless extended by Congress the deduction will no longer be available after 2013.

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Education Credits Can Be Claimed On An Amended Return
Individuals who could have claimed an education credit but failed to do so on their original returns, may claim the credit on an amended return. In general, an amended return may be filed within three years from the date your return was filed or within two years from the time the tax was paid, whichever is later.

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Coverdell Education Savings Accounts
Coverdell accounts are education trusts that allow funds to be put away for a child's education. Tax on earnings from these accounts is deferred until the funds are withdrawn, and if used for qualified education purposes, the entire withdrawal can be tax-free.These accounts have seen limited use, due in part to small dollar amounts that can be deposited and many limitations imposed both on the contributor and beneficiary of the accounts.

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Deduction for Higher Education Interest
Generally, taxpayers can only deduct home mortgage interest, investment interest, and business interest. However, interest paid on student loans used to pay tuition, room and board and related expenses for qualified higher education is an above-the-line deduction. The deduction is limited to $2,500.

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Education Credits: Who Gets the Benefit?
When it comes to who gets the benefit of the education credits, it might not be who you would expect. The IRS has provided clarification as to who can claim the education credits. These are credits allowed for qualifying higher education costs for yourself, your spouse, or your dependents.

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Educational Tax Credits
The law currently provides for two tax credits, the American Opportunity and the Lifetime Learning Credits. Both credits will reduce a taxpayer's tax liability dollar for dollar until the tax reaches zero. Any Lifetime credit in excess of the tax liability is lost. The American Opportunity credit provides for a partial excess credit refund.  The credit is not allowed for taxpayers who file married separate returns. The credits are elective and the taxpayer must choose between the two credits for each student.

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Self-Employed Education Twists
Self-employed taxpayers should consider their options carefully when it comes to applying tax benefits for their own education tuition and expenses. Tax law provides multiple ways to benefit from the educational expenses and one may provide more benefit to you than another based on your particular set of circumstances.

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Home Equity Can Provide Funds for Children's Education
Many parents of college age children would like to utilize the equity in their home to help pay for college expenses. When considering this course of action, there are two issues: (1) Should the first trust deed be refinanced, or should a second trust deed line of credit be secured? and (2) Will the interest be deductible?

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Penalty-Free IRA Withdrawals
Generally, when funds are withdrawn from an IRA before a taxpayer reaches age 59-1/2, a 10% early withdrawal penalty applies to the distribution. However, penalty-free withdrawals are permitted if the funds are used to pay qualified higher education expenses. The withdrawals will still be subject to regular income tax.

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Qualified Tuition Programs - Section 529 Plans
Section 529 Plans (named after the section of the IRS Code that created them) are plans established to help families save and pay for college in a tax-advantaged way and are available to everyone, regardless of income. These state-sponsored plans allow you to gift large sums of money for a family member’s college education, while you maintain control of the funds.

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Use Appreciated Stock to Fund Obligations
You might want to consider gifting stock that has appreciated in value to your children (over age 23) to help pay for their education or to purchase a home, or to parents to help pay for their eldercare. By doing this, you shift the tax liability for the gain from selling the stock to the child or parent, who with proper planning, may pay a lower tax on the profits than you would.

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