Tax Benefits for Education

August means back to school! There are lots of tax benefits for higher education. The American Opportunity Credit is a credit of up to $2,500 per year for the first four years of college. The Lifetime Learning Credit is a credit of up to $2,000 per year for years after the first four years of higher education. Child not college age yet? You can still get a tax benefit by setting aside savings to a Qualified Tuition Program, also known as a 529 plan. Contributions to eligible plans are deductible for state purposes, and withdrawals from such an account are not taxable if used for education expenses. Withdrawals from 529 plans can now also be used for qualified K-12 expenses, up to $10,000 per year. There are other tax benefits for education, including penalty-free IRA withdrawals, student loan interest deductions, and gift-tax exceptions. Speak with your CPA about the methods that are best for your situation.