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Plan Well, Retire Well

Saving and investing your money
graduation rev

Save on Income Taxes if You're Paying for College, or Saving for It


Tax Breaks for Higher Education website revised for 2013. Paying for college is one of the biggest financial commitments a parent or child makes in his lifetime. University of Illinois Extension's webpage, Tax Breaks for Higher Education, explains the tax breaks that can help ease the financial burden of saving for college, paying for it, or paying off the loans afterward. Revisions for 2013 have just been posted, and the website contains loads of practical information to help you claim these tax breaks.

The devil is in the details! And this website is chock full of the details you need.

If you're looking for an overview of the various options available to you, read the Highlights section.

For details such as income qualifications or the types of education programs covered by each tax break, head for the second section of the website, Eligibility and Limitations.

If your worry is the tax records you'll need and how to claim these tax breaks on your income taxes, Tax Forms and Reporting lists the tax statements you should receive and tells you exactly where to report or claim the tax break.

Whether you're planning ahead or already dealing with college expenses, you'll find information on tax breaks for your situation. The website covers eight permanent federal tax breaks:

Saving for future expenses

  • Coverdell Education Savings Account
  • Qualified Tuition Programs (529 Plans)
  • Savings Bond Interest Deduction

Paying for current expenses

  • American Opportunity Credit (Hope Scholarship Credit)
  • Lifetime Learning Credit
  • Employer-Provided Assistance
  • Penalty-Free Early Distributions from IRAs

Making payments on student loans

  • Student Loan Interest Deduction

When there is news about these tax breaks, we'll write about those here on the Plan Well, Retire Well blog. Watch for a post next week about the temporary Higher Education Expense Deduction, which has been extended many times and is now set to expire at the end of 2013.

 



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Can you tell me a little more about the Lifetime Learning Credit? Is there anything else past the options above for someone trying to pay for school out of pocket while working? I am at UIC Grad School......Thanks
by Aaron Petersen on Thursday 5/23/2013

The Lifetime Learning Credit is one of the most flexible credits, and can be used for grad school as well as almost any other kind of post-secondary education. There are no limits on the number of times you can use it, but there are restrictions if your income exceeds certain limits. Go to our website, urbanext.illinois.edu/taxbreaks/, to check out all the details. If you're borrowing money, grad school expenses are also eligible for the Student Loan Interest Deduction. Check whether your state offers a state income tax deduction for money that goes through your state's Qualified Tuition Program, because that also applies to graduate school.
by Karen Chan on Thursday 5/23/2013