Students And Tax Breaks

Students and Tax Breaks November is always application season for high-school and college seniors

, but the weak economy is seeing a big increase in older workers returning to school in efforts to acquire new skills. This can be a financial burden, but for many Americans, the U.S. government can help. The American Opportunity Tax Credit, 529 Plans and the Lifetime Learning Credit are huge opportunities of tax relief for returning students. It is one of the best benefits for those who qualify. Its a tax relief of up to $2,500 per student per year. The family can get a check for up to $1,000 from the government if no tax is due. If the taxpayer pays tuition in December for the spring semester, the credit may be claimed for that years taxes.

The Lifetime Learning Credit is a useful tax relief of up to $2,000 for tuition and fees per year. It applies to graduate as well as undergraduate education, plus continuing-education courses taken to acquire or improve job skills. The credit fully phases out at $122,000 of AGI for most joint returns and $61,000 for most single returns.

Qualified Tuition Programs, otherwise known as 529 plans are often the best tax relief for those that dont qualify for other breaks. Individual donors may put up to $65,000 per beneficiary into a 529 plan once every five years, without gift tax consequences. In 2008, President Obama and his wife used this provision to put $120,000 each into 529 plans for their two daughters To land a better or more stable job, people are returning to school in great numbers. 52% of employers surveyed by ManpowerGroup said they cant find workers with the necessary skills-even as the unemployment rate sits above 9%. Between 2006 and 2009, enrollment of students age 35 and older in post-high-school programs grew faster than enrollments of those 18 to 24. Unfortunately, the price is getting higher too. The 2011-12 the average price rose 4.5% at private colleges and more than 7% at public colleges-higher than the 3.6% overall inflation rate.

More people are utilizing tax relief to ease the sting. In 2009, taxpayers claimed $14.7 billion in deductions and credits for undergraduate and graduate education. There are several ways to ease college costs and tax relief is one of them. Some families qualify for tax relief on income grounds due to the rocky economy. Retirement accounts and pensions are usually not included for these calculations. Several tax benefits have income limits as well. Fortunately, some of those limits are higher than the limits for financial aid, and they dont take a taxpayers assets into consideration.

by: Daniel King

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