The Mind Is A Terrible Thing To Waste!

As the costs for the favor of a college education continue to rise every year, is it any wonder that achieving a decent education is seen as a great privilege as opposed to a legitimate right?

The average cost at a private college last year for tuition, fees, room and board, was $30,207.00. The experts predict that the average cost will increase by 5% each year; enrollment at a more prestigious college will cost you even more.

In comparison, the average cost of a year’s tuition, fees, room and board at a public university was $11,351, and if the experts are correct these prices will also rise 5% per annum.

The luxury of a good education is a valuable asset, though regardless of scholarships, grants, and federal loans, with these kinds of exorbitant costs you may need to consider alternative types of loans.

Taking out a loan to further your education might not be such a bad idea when it comes to filing your tax return; e.g. $2,500.00 of the interest on your student loan might be a deduction that will help reduce your taxable income, possibly resulting in a smaller tax bill.

These are some of the filing requirement conditions should you choose to itemize this deduction:

If you are married, you cannot file separately to get this tax break; you must file jointly.

You are not entitled to this deduction if you can be claimed as an exemption on anyone else’s tax return.

The loan must have been taken out by you, your spouse, or a dependent (related; or who receives most of their support from you).

The educational institution must meet student aid program guidelines administered by the U.S. Department of Education.

The qualifying student must be enrolled at least half-time in a program that leads to a degree, or other educational credential (certificate).

The loan must have been taken out solely to pay for educational expenses.

The loan cannot be from an employer, or from a related person.

The expenses incurred/paid must be within a “reasonable amount of time” before or after you received the loan; i.e. must be traced to a particular academic period.

The loan must be used to pay qualified higher education expenses, such as tuition, fees, room and board, books, supplies, transportation, and other necessary expenses.

The importance of education is solidified by the large number of provisions that Congress incorporated in the Economic Growth and Tax Relief Act of 2001 (e.g. tax breaks for saving toward future education; help for parents with current education costs). However, unless Congress acts before December 31st, 2010, to renew, extend, or amend these provisions, the changes will automatically expire.

Keep in mind, that like many other tax breaks, the student loan interest deduction is limited by the IRS if you earn over a certain amount of money. The differing limitations, interactions and definitions of these provisions, along with the education benefits already in the Internal Revenue Code, make it more important than ever to hire a CPA who can analyze and evaluate which of the education tax benefits apply to your particular situation.

So as you stumble through the complications of tax planning, just remember that education is a valuable commodity, and “THE MIND IS A TERRIBLE THING TO WASTE!”