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H&R Block Answers Questions Regarding Tax Credits And Deductions For Education

H&R Block Answers Questions Regarding Tax Credits And Deductions For Education

Education expenses can be claimed as a tax credit on an itemized return, but under what circumstances? For instance, does a long-term course of study as an electrician count as a 4-year post-grad program? Tax software like H&R Block can help you answer these important questions.

H&R Block

According to income tax experts H&R Block, the American Opportunity Credit, or AOC, may be claimed by individuals who are working toward an educational credential such as a certificate or bachelor’s degree. That’s it.

H & R Block also advises its clients to look at the Lifetime Learning Credit as tuition and fees may be claimed under its rules as a deduction. One caveat is that the school must be eligible, and the courses must be helpful toward getting or improving career-related skills. A person does not have to be working toward a degree of any kind to claim this tax credit.

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In fact, both the tuition and fees deduction and the Lifelong Learning Credit may be taken together, but the taxpayer must use different expenses to qualify. Go online to IRS.gov to consult Publication 970 about the Lifetime Learning Credit and the deduction for tuition and associated fees.

Another taxes and education question comes up regarding CLEP tests. Students wonder if the testing fees are deductible. Experts at H & R Block say no they are not for a couple of reasons.

CLEP tests garner an individual education credits for life experience or knowledge. However, as there is no real instruction or course being taken at an eligible educational institution, the CLEP test expenses are not legitimately deductible. This may be a source of frustration for some people who are enrolled in college or about to start and are trying to get ahead of the game as far as course credit goes. However, the IRS very narrowly defines what fees do and do not qualify as a deduction.

Go online to H & R Block at hrblock.com to get answers to more tax-related questions.

Author Steven PattersonPosted on June 7, 2014May 5, 2023Categories H&R Block, Tax PreparationTags 529 plan, adjusted gross income, American Taxpayer Relief Act of 2012, Charitable organization, Earned Income Tax Credit, Education, Flexible spending account, H&R Block, Income tax, Individual Retirement Account, internal revenue service, irs, Lifetime Learning Credit, Mortgage loan, Patient Protection and Affordable Care Act, tax, Tax credit, Tax deduction

Traditional IRA or A Roth IRA You Decide

Are not all retirement accounts the same, they just hold money for you while you are waiting to retire correct? This is not true and most retirement accounts differ in many ways and these differences can make or break the account for you. Below is listed a few differences between a Traditional IRA and a Roth IRA.

A Roth IRA is a retirement account that requires for the holder to pay taxes on the money that is contributed to the fund in the year it was earned. This is not true of a Traditional IRA which allows for the holder to wait until the funds are withdrawn in order to pay taxes on the money. Also there are Roth contribution limits and income limits which narrow the pool of people who can contribute to the fund.

When you contribute money to a Traditional IRA your adjusted gross income (AGI) is reduced. This means that when you file your taxes the amount of money you have made in the year is reduced by what you have contributed to the fund, and this is not the case when contributing to a Roth IRA. The lowering of your AGI has the potential to place you in a lower tax bracket and thus you can receive tax breaks and benefits.

It can also be argued for both a Traditional IRA and a Roth IRA that depending on which state you retire to one account can be better than the other. If you currently live in a higher income tax state than the one you wish to retire to then it is possible that by using a Traditional IRA you can save money because your income will be taxed later. The opposite is true of a Roth IRA because if you live in a lower income tax state and plan to move to a higher taxed state then you can save money.

There are benefits and disadvantages to both retirement accounts and depending on your financial situation one could be better suited for you.

Related articles
  • Traditional IRA or A Roth IRA You Decide (2011tax.org)
  • IRA: Traditional IRA and Roth IRA (2010tax.org)
Author StevePosted on May 1, 2011May 5, 2023Categories Retirement Savings, tax forms, Tax Law, Tax PreparationTags adjusted gross income, Individual Retirement Account, Money, Retirement, roth ira, tax, Traditional IRA, TurboTax2 Comments on Traditional IRA or A Roth IRA You Decide

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