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Credits & Deductions for Higher Education

Credits & Deductions for Higher Education

For those of you who attend college or have children who attend college, you may want to learn more about the higher education tax credits and deductions offered by the IRS.  The following list shows the credits and deductions available for the year 2009 with a brief summary of each. In the coming weeks, more detailed write-ups will follow for each individual item. 

• Hope Credit - not to be confused with the HOPE Scholarship/Grant available to Georgia students. This non-refundable credit is most beneficial to students in their first two years of post-secondary education and applies to tax years through 2008.  
  
• Lifetime Learning Credit - no limit on the number of years the credit can be claimed, but it cannot be claimed in conjunction with the Hope Credit or American Opportunity Credit for the same student in the same year. This credit is often beneficial to graduate students. 
  
• American Opportunity Credit - modifies the Hope Credit for the 2009 & 2010 tax years, making it available to a broader group of taxpayers. Many of those who are eligible will qualify for the maximum credit of $2,500 per student. 
  
• Tuition & Fees Deduction - deductions up to $4,000 can be taken for qualified education expenses paid for the taxpayer, spouse or any dependents. This deduction can be taken even if the taxpayer does not itemize. 
  
• Student Loan Interest Deduction - this deduction is available to taxpayers who paid student loan interest during the tax year. The maximum deduction is $2,500 and it can be taken even if the taxpayer does not itemize.

Ga counties qualifying for Federal Disaster Assistance

Updated 9/28/09 to include Bartow, Catoosa, Coweta, DeKalb, Fulton, Gwinnett, Heard, Newton, Rockdale and Walker counties.

ATLANTA — Victims of recent severe storms and flooding in Georgia may qualify for tax relief from the Internal Revenue Service.

Following severe storms and flooding beginning Sept.18, the President declared Bartow, Carroll, Catoosa, Chattooga, Cherokee, Cobb, Coweta, DeKalb, Douglas, Fulton, Gwinnett, Heard, Newton, Paulding, Rockdale, Stephens and Walker counties federal disaster areas qualifying for individual assistance.

Tax deadline extended for Federal Disaster Area

The IRS has given individuals and businesses in the Georgia disaster counties an automatic extension until December 17, 2009 to file any returns and pay any taxes otherwise due between Sept 18 and Dec 17.

The counties include DeKalb, Fulton, Gwinnett, Cobb and Rockdale Counties, among others. This will be similar to the “tornado extension” several counties received last year.

9/16/09 - Federal & GA Home Buyers Credit Deadline is Approaching

The Nov. 30 deadline for first-time homebuyers to qualify for a federal ($8,000.00) and Georgia ($1,800.00) tax credit means deals need to be inked soon to make it through the closing process on time.

To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the homeowner.

For more information of the Federal Home Buyers Credit, click on the link below

More information on the Fed First-time Home Buyers Credit <

http://rs6.net/tn.jsp?et=1102702301572&s=1470&e=0017UaTuS9U-RgCVux91dI_nUNVSsRNDyk0d88JNG9pjLj0NAkw8PeSB7T_sC7I5hQLiAU7tYMu_ezDVYHTh0cMGdhqnyaKwnbO7Wj7x0yUYjX4BQOGlvcA0t8HXw_5fsRtiUP4Zmoo9KlrfrWZaIg4NQ==>

Summary of Georgia Homebuyer Tax Credit

House Bill 261 gives a credit of either $1,800 or 1.2 percent of the purchase price, whichever is less. (You can only claim one-third of the credit each year, beginning with your 2009 Georgia tax return.) The purpose of the bill is to create a stimulus for home sales, and give a boost to the Georgia real estate market.

Here is how the Georgia Homebuyer Tax Credit applies to home purchases:

1. Applies to single-family homes and condos if they are your primary residence

2. The property must have been for sale prior to May 11, 2009 and must still be for sale

3. The property must be in default on or before March 1, 2009

4. The property has already been foreclosed on and is held by the bank or mortgage company

Homes purchased between June 1 and November 30, 2009 that meet the criteria will be eligible for the tax credit.

The new Georgia Homebuyer tax credit makes for a powerful new home stimulus plan when combined with the Federal $8,000 first-time homebuyer tax credit. It is a great time to buy a home.

9/4/09 - All You Need to Know About HSA's

What is an HSA? HSA stands for "health savings account" and it is an easy way to save money for your family's healthcare expenses. The account is typically setup through your bank or insurance company, and contributions must be made in cash or through an employer cafeteria plan.
  
Who qualifies? Anyone under the age of 65 who meets the following criteria:

• Covered by an HSA-High Deductible Health Plan (HDHP)
   
• Cannot be claimed as a dependent by another person
    
• Is not covered by any other non-HDHP insurance plan
     
• Cannot be enrolled in Medicare

What is a High Deductible Health Plan?  For 2009, the IRS states that a HDHP is an insurance plan that has a minimum deductible of $1,150 for self-only coverage or $2,300 for family coverage.  The plan must limit out-of-pocket expenses to $5,800 for self-only coverage and $11,600 for family coverage.
 
How much can I contribute to my HSA in 2009?  If you're under the age of 55, you can contribute up to $3,000 for self-coverage or $5,950 for family coverage.  If you're 55 or older, you can contribute up to $4,000 for self-coverage or $6,950 for family coverage.  If two married individuals are 55 or older during the tax year with separate HSAs, the contribution limit increases to $7,950.  Excess contributions are not deductible and may be subject to other penalties.
 
What is a qualified distribution?  All distributions are strictly for qualified medical expenses. (For more information on qualified medical expenses, see our May 4, 2009 blog entry.)  Distributions used for anything other than qualified medical expenses are subject to a 10% penalty.
 
What is the advantage of an HSA?  The contributions to your account are excluded from your gross income, which helps to lower your taxable income.
 
Please contact our office if you have any additional questions on HSAs.

8/31/09 - Computer As Education Expense Covered Under 529 Plan

Did you know that in 2009 and 2010 the IRS is allowing computer-related items as qualified expenses under a 529 Plan?  Typically a 529 Plan was only used to pay for a college student's tuition and books.  Now a student that is enrolled in an eligible educational institution can claim internet access, educational software, and other computer-related technology as qualified educational expenses. 

8/24/09 - Monthly Payment Plan With the IRS

If you've fallen behind on your taxes or owe a large amount for the most recent tax year, you may consider setting up an installment agreement. However, you will continue to accrue penalties and interest until the entire balance is paid off.  You will also have to pay a nominal fee for engaging in a payment plan and will be required to fill out various forms. The following is a list of the four types of installment agreements offered by the IRS:
 
Guaranteed Installment Agreements

• Balance Due = $10,000 or less
• You haven't filed late or paid late in the past 5 years
• All tax returns have been filed
• Repayment period is less than 36 months
• You've had no other installment agreement in the past 5 years
• You agree to file on time and pay on time in the future

Streamlined Installment Agreements

• Balance Due = $25,000 or less
• Repayment period is less than 60 months

Partial Payment Agreement

• Payments are based on what you can afford after considering essential living expenses
• May cover a longer repayment period
• Additional paperwork is required

Non-Streamlined Installment Agreements

• Balance Due = $25,000 or more
• You need longer than 5 years to pay the balance
• You do not meet the requirements for the Streamlined or Guaranteed payment plans
• Additional paperwork is required

Please contact our office if you have any questions regarding IRS installment agreements.

8/10/09 - Usernames and Passwords: Potential Problems?

In the age of technology you've probably given in to the trend of managing your personal information online.  If so, you've created numerous passwords for each of your brokerage and bank accounts.  More than likely, you have user names and passwords for other personal accounts as well.  In the interest of keeping all of your data secure, you may have never written down your log-in information or shared it with anyone else.
 
While it is smart to keep this information secure, it can be very frustrating for your family when you pass away.  Therefore, it is important to record all of this information and store it in a safe place.  You may want to give it to a trusted friend, relative or lawyer.  Keep in mind the authority that you are giving them - you must be able to count on them to keep the information secure.  Other options include storing the information in a fireproof personal safe, safety deposit box, or an online database such as Legacy Locker.  Regardless of where you choose to store this information, it is important to leave specific instructions in your will.  Taking the time to do this will save your heirs from this potential nightmare during a time of grief.  

8/3/09 - Cash For Clunkers

*According to recent news casts, this program may be suspended in the near future due to lack of funding. 

However, if it continues to run through November 1st as planned, the information below may be helpful if you plan to purchase a new vehicle.

The National Highway Traffic Safety Administration (NHTSA) recently implemented the Car Allowance Rebate System (CARS), also known as "Cash for Clunkers." This program allows consumers to trade in their older, less fuel efficient vehicles for vouchers up to $4,500.  These vouchers help consumers buy new, more fuel efficient vehicles from July 1, 2009 - November 1, 2009.  Some of the provisions of this program are as follows: 

• Individuals, corporations, partnerships and all other legal entities may participate
• An individual or legal entity may only receive one voucher
• The vehicle must be owned and insured by the individual or legal entity for at least one year prior to the trade-in
• In general, the old vehicle must be in drivable condition, have a fuel economy of less than or equal to 18mpg and less than 25 years old
• In general, the new vehicle must be more fuel efficient and cost less than $45,000

 SUMMARY OF VOUCHER QUALIFICATIONS

Description	Min. Fuel  Economy For New Vehicle	$3,500 Voucher	$4,500 Voucher
Passenger Car	22 mpg	Mileage improvement of at least 4 mpg	Mileage improvement of at least 10 mpg
Light-Duty Truck**	18 mpg	Mileage improvement of at least 2 mpg	Mileage improvement of at least 5 mpg
Large Light-Duty Truck***	15 mpg	Mileage improvement of at least 1 mpg or trade-in of a work truck	Mileage improvement of at least 2 mpg
Commercial Truck****		Trade-in must be at least pre-2002
*EPA Combined   **under 6,000 lbs.   ***6,000 lbs. - 8,500 lbs.  ****8,500 lbs - 10,000 lbs.

For more information on this program or to determine if you qualify, please visit the CARS website or contact a local participating automobile dealer.
http://www.fueleconomy.gov/feg/CarsSearchIntro.shtml