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Tax Breaks for The Scholastically Inclined
Tip of the Month
September 2001
Tax Breaks for The Scholastically Inclined
For student loans after December 31, 2001, the student loan deduction has been removed. It used to be the first 60 months in which interest payments are required on the loan. Now it will be easier on those who take more than 5 years to pay back their loans.
Income Eligibility:
The income-eligibility limits for the student loan deduction have been raised. The current regulations phase out the deduction for single tax payers with adjusted gross incomes of between $40,000 and $50,000, and for married taxpayers, incomes of between $60,000 and $75,000. Starting next year, the new limits will be between $50,000 and $65,000 for the single taxpayer and between $100,000 to $130,000 on those filing jointly.
Employer Education Assistance:
Good news for those with tuition assistance from their employer. The tax break for educational assistance from an employer was set to expire at the end of this year (2001). The new law makes it permanent. And, in addition, the new law extends the exemption to graduate studies (but not until 2002). The current exemption is for $5,250 per year maximum exemption and only applies to undergraduate studies.
Education IRAs Now For Little Ones...
Our new tax law now permits disbursement of Educational IRA funds for elementary and high school expenses. This includes tuition, fees, tutoring, books, supplies, equipment and "special needs services" for special needs students.
...And Their Computers
Now, computers, peripherals, software and Internet access are allowable expenditures from education IRAs for elementary and secondary school children. However, Doom II and Quake do not qualify; the software must be primarily educational in nature. Sorry, kids.
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.
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