Brian Nash, owner of Nash College Planning Strategies, is a college planning advisor who steers parents through the confusing and frustrating financial aid process and student positioning .
Brian has also written the free eBook "How to Beat The High Cost of College", filled with important financial planning advice that can save parents tens of thousands of dollars on their child's college tuition.
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In this short video, Brian Nash, a college financial aid consultant, helps parents of college-bound students navigate the challenging and confusing tax code to take advantage of educational tax breaks. This video includes real tax advice that viewers can use to get back thousands of dollars on college spending.
The federal government is constantly making changes to the tax law, which can make it difficult for regular people to keep up with all the tax breaks they might be eligible for, including tax breaks for spending on your child's education. So please add this video to a playlist and check back from time to time to look for changes.
I've done a lot of research and in this short video I will share some of the most important tax breaks you need to know about in order to get a little of that money back from Uncle Sam.
Here are some of the most common educational tax benefits that you need to be aware of:
• Withdrawals from qualified state tuition programs (like Section 529 plans) are now tax-free.
• Coverdell ESA's (the old Education IRA's) are bigger. Instead of being capped at $500, beneficiaries under the age of 18 can now receive up to $2,000 per year. There's no tax deduction for the contribution, but the tax is deferred on the fund's growth and withdrawals are tax-free for qualified expenses. There's also a useful loophole in this law: while there are income limits for high-earning contributors, anyone can contribute, including lower-earning relatives.
• The "American Opportunity Credit" has been increased. Parents are able to receive a 100% tax credit of up to $2,500 of each child's tuition fees for the first two years. 40% of this credit is now a refundable credit which means that you can receive up to $1,000 even if you owe no taxes.
• The "Lifetime Learning Credit" has remained the same. For the tax year you may be able to claim a lifetime learning credit of up to $2,000 for qualified education expenses paid for all eligible students.
• Deductions for the interest paid on qualified student loans have been expanded. The interest deductions have been raised to $2,500 and the deduction will no longer be limited to the first 60 months of interest payments.
It's important to note that there are exceptions and uncertainties about these tax breaks. For example, some upper middle class families may not qualify for many of the benefits, especially individuals that earn more $60,000 or joint filers who earn more than $120,000.
Also, applying for one credit may make you ineligible for another. The same child, for example, cannot earn you both a Hope Credit and a Lifetime Learning Credit in the same year. Nor can you claim either of these credits for expenses paid with money pulled out of 529 Plans or Coverdell ESA's.
Most importantly, many of these benefits will have an effect on your Expected Family Contribution. Picking up a Hope Credit or Lifetime Learning Credit, for example, will leave you with more untaxed income. That means colleges may lower their financial aid packages. You should still end up paying less money, but you'll need to figure out precisely how much.
Want to learn even more about how the current tax code can benefit your college spending? Visit my website at http://www. NashCollegePlanning.com and check out our next video.
My goal is to make college financially possible for every family.