1601 Colonial Parkway, Inverness IL 60067
847-991-5200 | don@cronin-cpa.com

 

Tax News and Information

With the kids going back to school it is important to review tax benefits available for education related expenses:

College Expenses

There are several tax incentives available for education expenses.  Generally credits and/or deductions are available for yourself, your spouse, and your dependents.  It is important to compare the alternatives to maximize this tax benefit.

American Opportunity Credit

A new education credit (replacing the HOPE credit) that provides a credit of up to $2,500 per student for college tuition, fees and books. Income limits apply to this credit.  Up to 40% of the credit is refundable which means that if you have no tax liability you can still receive a refund of up to 40% of the credit.

  • Available for only the first four years of post- secondary education.
  • Only available for four tax years per student.
  • Student must be pursuing an undergraduate degree or other recognized educational credential.
  • Student must be enrolled at least half time for at least one academic period beginning during the year.
  • Credit phased out when modified adjusted gross income exceeds $180,000 for married filing joint  ($90,000 for single or head of household).
  • Eligible expenses include tuition and fees, and course related books, supplies and equipment.

Lifetime Learning Credit

This credit is equal to 20% of education expenses paid up to a total of $2,000 per tax return. The credit is not refundable. Income limits apply to this credit.

  • Available for all years of post-secondary education and for courses to acquire or improve job skills. Available for unlimited number of years.
  • Student does not need to be pursuing a degree or other recognized educational credential.
  • Credit phased out when modified adjusted gross income exceeds $120,000 for married filing joint  ($60,000 for single or head of household).
  • Lifetime Learning credit can not be claimed in the same year for the same student that a American Opportunity Credit is claimed.

Above-the-line deduction for tuition and fees

A deduction of up to $4,000 is available for Qualified tuition expenses.  Income limitations apply.

  • Credit phased out when modified adjusted gross income exceeds $130,000 for married filing joint  ($65,000 for single or head of household).
  • You don’t need to itemize for this deduction.
  • Can’t be claimed if the American Opportunity or the Lifetime Learning Credit is claimed for the same student in the same year.

Illinois Tax Incentives

Illinois allows a deduction of up to $10,000 per year ($20,000 if married and filing a joint return) for funds contributed to the Illinois Bright Start or Bright Directions 529 plans.

  • The plans now offer low risk investments that allow for deduction of the contribution with little investment risk. With Illinois tax rates now at 5%, this deduction is appealing even for a temporary investment to pay for upcoming tuition.

High School and Elementary expenses

Illinois provides a credit of up to $500 for educational expenses paid directly to an Illinois school.

The credit is 25% of the expenditure and total expenses must exceed $250 to receive any credit.

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The information presented in this website is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.

Serving Chicago & Chicago Northwest Suburbs such as: Palatine, Inverness, Schaumburg, Hoffman Estates, Barrington, Elk Grove, Buffalo Grove, Rolling Meadows, Wheeling, Arlington Heights, Prospect Heights, Des Plaines, Deer Park, Lake Zurich, Hawthorn Woods, Kildeer, Deerpark, Long Grove, Fox River Grove in both Cook County and Lake County

1601 Colonial Parkway, Inverness, IL 60067 • don@cronin-cpa.com • 847-991-5200 • Fax: 847-241-0050