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Denver Tax Preparation and Education Expenses

May 11, 2016

The price of college continues to skyrocket while wages have remained stagnate over the past several years. In 1976-1977 it is estimated that a student who worked full time during the 12 weeks of summer could afford to pay for 100% of their tuition, and in most schools have some left over for books and spending money. This is not the case today. It is estimated that a summer’s worth of full time work will cover less than 25% of tuition and fees at the average university. Most college students are forced to take out loans to cover that gap. It is estimated that the class of 2015 graduated with an average of more than $35,000 in student loan debt. If you are among those striving to pay back school debt or are still in school, consult a Denver tax specialist to be sure that you’re receiving all the tax credits and deductions to which you are entitled.

Tax Tips for Current Students:
Education expenses are eligible tax deductions. You can deduct expenses you pay for yourself or any person that you claim as a dependent. Students keep in mind that your deduction may be limited if your parents are still claiming you as a dependent. Schedule a conference to meet with a tax consultant to see which filing status would be most beneficial to your family. Also be sure to ask about the American Opportunity Credit.

Expenses that qualify:
  • Books
  • Supplies
  • Equipment Required for Coursework
  • Tuition
  • School Fees
Expenses that do not qualify:
  • Transportation
  • Room and Board
  • Living Expenses
  • Insurance
  • Medical Expenses
  • Activity and Sport Fees
Tips for Those Paying Off Student Loans
Student loan interest can provide you with up to $2500 less taxable income. To qualify, you must be making less than $65,000 if filing single, or $130,000 if married and filing jointly. This deduction is available for the borrower who signed for the loan and is repaying it so it can be either the student or their parent. Look for an interest statement, or 1098-E from your loan servicer if you paid more than $600 in interest in the past tax year.

To help ease the burden of large student loans there have been several programs set up to accelerate payback and arrange for some balance forgiveness. Some income-driven payback programs adjust your payments to your income and will forgive the balance of your loan after you have made payments for a specified amount of time, usually 20 or 25 years. These are great programs that will eliminate a lifelong payment burden, but do keep in mind that balance forgiveness could mean a larger tax bill for the year the balance is disbursed. The borrower must claim any forgiven balance income.

There are many reasons to use Bloch, Rothman & Associates, LTD as your tax professional as opposed to online software. We have a better understanding of your situation and can help you develop a plan to minimize tax burden and maximize deductions. Call 303-321-7160 to consult with us today!