College Families Will be Overpaying Their Taxes – Again!
July 27th, 2008
Reecy Aresty asked:
Families who made their best guess as to which of the Education Tax Incentives would save them the most on their income taxes, have put their 2007 tax returns to bed. However, for many, a sigh of relief is a bit premature. Countless families, even when assisted by professional tax preparers, chose incorrectly and will or have significantly overpaid the IRS – AGAIN!
Mark Twain once said, “No man’s life, liberty, or property are safe while the legislature is in session,” and never have truer words been spoken:
On June 6, 2001, President Bush signed HR 2014 into law. This created The Tuition and Fees Deduction, based on Senator Charles E. Schumer’s (D-NY) Make College Affordable Act. However, the president signed a watered down version and consequently, it doesn’t work for the families who need it the most.
For many years, Senator Charles E. Schumer (D-NY) tirelessly championed legislation that would allow families, including independent students, to deduct a portion of their college expenses on their tax returns. Originally, the Senator’s proposed legislation, the Make College Affordable Act, would have allowed millions of American families to deduct up to $12,000 per year from their total incomes to help reduce the cost of college tuition and related expenses.
Unfortunately, to the chagrin of the Senator and to the detriment of untold numbers of taxpayers with college students, HR 2014 offers a dramatically reduced Tuition and Fees Deduction of a mere $3,000 for tax years 2002-2003, and $4,000, for tax years 2004-2006, (extended to 2007).
The drastic slashing by Congress of Senator Schumer’s bill and President Bush’s failure to send it back to them is the case in point substantiating that our government doesn’t give a hoot in hell about the financial struggle the average parent endures in their endless pursuit of the American dream for their children.
Effective legislation to make college expenses tax deductible was long overdue and began with the Tax Payer Relief Act of 1997, which Senator Schumer supported and voted for. The Act created two education tax credits; the HOPE Scholarship Credit (maximum $1,500 a year for 2 years), and the Lifetime Learning Credit (maximum $1,000 increasing to $2,000 in 2003).
Note: A tax deduction lowers taxable income, and the savings depends on the filer’s tax bracket. A tax credit directly lowers taxes by the amount of the credit, dollar for dollar, regardless of the filer’s tax bracket.
Although it was a step in the right direction, The Act fell far too short in providing major tax relief for college families, especially in view of soaring tuition costs and other related expenses that families endure year after year. Nonetheless, the real tragedy is when the Tuition and Fees Deduction is taken by taxpayers who qualify for The HOPE Scholarship Credit or The Lifetime Learning Credit, and consequently, overpay their taxes each year their student is in college!
Affluent single and head of household taxpayers whose adjusted gross incomes (AGI) exceed $51,000, and joint filers whose AGI exceeds $102,000, will not qualify for the HOPE Scholarship or Lifetime Learning Credit, and are therefore, the only ones who actually benefit from taking the Tuition and Fees Deduction. Thus, camouflaged as tax relief for all of America’s college families, what Congress actually did was Robin-Hoodwink lower and middle income families by taking from them and giving to the rich!
Taxpayers only have the option of taking either the tuition deduction or one of the education credits. Those families who took the deduction when they qualified for either of the education credits, cost themselves hundreds of dollars and possible much more.
Think what you may about the Clinton Administration, but remember, it was on his watch that the HOPE Scholarship and Lifetime Learning Credit were signed into law. It doesn’t benefit college families enough, but it’s a good start. It’s certainly better than nothing, and it is still the best tax benefit for the majority of college families – provided of course, they know enough to choose it…
Rhoda Soh
Families who made their best guess as to which of the Education Tax Incentives would save them the most on their income taxes, have put their 2007 tax returns to bed. However, for many, a sigh of relief is a bit premature. Countless families, even when assisted by professional tax preparers, chose incorrectly and will or have significantly overpaid the IRS – AGAIN!
Mark Twain once said, “No man’s life, liberty, or property are safe while the legislature is in session,” and never have truer words been spoken:
On June 6, 2001, President Bush signed HR 2014 into law. This created The Tuition and Fees Deduction, based on Senator Charles E. Schumer’s (D-NY) Make College Affordable Act. However, the president signed a watered down version and consequently, it doesn’t work for the families who need it the most.
For many years, Senator Charles E. Schumer (D-NY) tirelessly championed legislation that would allow families, including independent students, to deduct a portion of their college expenses on their tax returns. Originally, the Senator’s proposed legislation, the Make College Affordable Act, would have allowed millions of American families to deduct up to $12,000 per year from their total incomes to help reduce the cost of college tuition and related expenses.
Unfortunately, to the chagrin of the Senator and to the detriment of untold numbers of taxpayers with college students, HR 2014 offers a dramatically reduced Tuition and Fees Deduction of a mere $3,000 for tax years 2002-2003, and $4,000, for tax years 2004-2006, (extended to 2007).
The drastic slashing by Congress of Senator Schumer’s bill and President Bush’s failure to send it back to them is the case in point substantiating that our government doesn’t give a hoot in hell about the financial struggle the average parent endures in their endless pursuit of the American dream for their children.
Effective legislation to make college expenses tax deductible was long overdue and began with the Tax Payer Relief Act of 1997, which Senator Schumer supported and voted for. The Act created two education tax credits; the HOPE Scholarship Credit (maximum $1,500 a year for 2 years), and the Lifetime Learning Credit (maximum $1,000 increasing to $2,000 in 2003).
Note: A tax deduction lowers taxable income, and the savings depends on the filer’s tax bracket. A tax credit directly lowers taxes by the amount of the credit, dollar for dollar, regardless of the filer’s tax bracket.
Although it was a step in the right direction, The Act fell far too short in providing major tax relief for college families, especially in view of soaring tuition costs and other related expenses that families endure year after year. Nonetheless, the real tragedy is when the Tuition and Fees Deduction is taken by taxpayers who qualify for The HOPE Scholarship Credit or The Lifetime Learning Credit, and consequently, overpay their taxes each year their student is in college!
Affluent single and head of household taxpayers whose adjusted gross incomes (AGI) exceed $51,000, and joint filers whose AGI exceeds $102,000, will not qualify for the HOPE Scholarship or Lifetime Learning Credit, and are therefore, the only ones who actually benefit from taking the Tuition and Fees Deduction. Thus, camouflaged as tax relief for all of America’s college families, what Congress actually did was Robin-Hoodwink lower and middle income families by taking from them and giving to the rich!
Taxpayers only have the option of taking either the tuition deduction or one of the education credits. Those families who took the deduction when they qualified for either of the education credits, cost themselves hundreds of dollars and possible much more.
Think what you may about the Clinton Administration, but remember, it was on his watch that the HOPE Scholarship and Lifetime Learning Credit were signed into law. It doesn’t benefit college families enough, but it’s a good start. It’s certainly better than nothing, and it is still the best tax benefit for the majority of college families – provided of course, they know enough to choose it…
Rhoda Soh