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Highlights of 2008 Tax Changes
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Higher education is an investment
in everyone's future. According to recent statistics, parents
only save an average of $9,956 for their children's higher education.
Money Magazine reported that nearly half of the parents have no
savings at all. In 20 years, the average four year college education
is expected to cost $154,000 for public schooling and more than
$306,000 for a private education according to a recent data from
the College Board. The continuing rise in college costs, however,
leaves many parents wondering how they'll fund their children's
education.
To help you plan for present or future education expenses, there
are a number of tax breaks and education incentives for students
and their families. You may be eligible to take advantages of
these money-saving benefits.
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a nonrefundable credit, can be
claimed against federal income taxes up to $1,800 per student,
per year, for qualified tuition and related expenses for the first
two years of a college education. The maximum HOPE credit amount
and AGI phase-out ranges are indexed for inflation.
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a nonrefundable credit, can be
claimed against federal income taxes up to $2,000 of education
costs each year. The credit can be used for the education beyond
the first two years of college, or taking classes part-time to
acquire or improve job skills, the credit is equal to 20% of first
$10,000 tuition and fees.
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Include tuition and fees required
to be paid to an eligible educational institution as a condition
of enrollment or attendance of an eligible student. Books, supplies,
insurance, travel, meals & lodging, and similar personal, living
or family expenses do not qualify. A student may use HOPE in only
two different tax years, and can't use Lifetime Learning Credit
in the same year. Under HOPE, a student must be enrolled at least
half-time. The Lifetime Learning Credit has no half-time rule
-- even a single class qualifies.
Who is Eligible? You, your spouse, or any child claimed as your
dependent. If the child is your dependent, the money is considered
to be paid by you even if it is paid by the child.
Phase Out. Both Credits phase out as your modified AGI is between
$96,000 and $116,000 for joint returns ($48,000 and $58,000 for
single filers) in 2008.
* The HOPE Credit is computed on a per-student basis, while Lifetime
Learning Credit is computed on a family or per-return basis.
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