Tap the 529
Many parents spend years accumulating savings for their children in the tax-advantaged 529 savings plan, which allows you to rack up dividends and interest on your tax-free savings. What happens if your child gets a full scholarship to college or decides not to go? The good news is you can change the designated beneficiary for the account and name yourself. Remember that in order to avoid tax consequences, the money you withdraw must be spent on qualified education expenses. Those expenses include tuition, fees, room, board, required books, supplies, and equipment.
Cash in on Credits
If you qualify, the aptly named Lifetime Learning Credit provides a credit of up to 20 percent of your qualified education expenses, up to a maximum of $2,000. It can even be used for just one class at an eligible college or university. In addition, the American Opportunity Credit (AOC) will cover up to 100 percent of the first $2,000 of qualified education expenses you pay and 25 percent of the next $2,000 of qualified education expenses you pay. With the AOC, you must be enrolled at least half-time in a qualifying institution. While there are no age restrictions for either credit, note that your income could affect your eligibility and what you receive.
Your Local CPA Can Help
College is an exciting time offering many new experiences, including managing your own money. If you or your family has questions about financial topics, be sure to consult your local CPA. He or she can help you address all your important financial concerns.
Seeking help to assess the financial pros and cons of college after 25? Consult your local CPA for insights and advice. He or she can help you address all your financial concerns.
Visit NCACPA’s student resources section on the website for more helpful tips and tools!
This content is in support of 360 Degrees of Financial Literacy, a national effort of the AICPA and the state CPA societies to improve the financial understanding of Americans. For more information about the profession’s efforts, visit www.360financialliteracy.org.”
The American Institute of Certified Public Accountants © 2014