College families overpay the
IRS – again!
by Reecy
Aresty
College Admissions/Financial Aid Expert and
Author
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 2006 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
already 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
the past several years, Senator Charles E. Schumer (D-NY) has been
tirelessly championing 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.
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,
increased to $1,650
in 2006), 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 $55,000, and joint filers whose AGI exceeds $110,000, 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…
About The Author
Reecy Aresty has been a financial advisor since 1977, and
is founder and president of College Assistance, Inc., located in Boca
Raton, Florida. He is the author of the critically-acclaimed,
How To Pay For College
Without Going Broke, an invaluable, parent/student
manual. Arguably the most revealing book ever
written on college admissions and financial aid, it is the only book of its
kind also available in Spanish.
Reecy has been
interviewed by financial experts on radio and television, and by many of
the nation's most respected publications including Money Magazine, US
News & World Report, Bloomberg News, Scripps Howard, The Washington Post,
financial icon Terry Savage for the Chicago Sun-Times,
Consumers Digest, The Education Times and AOL. An Internet search for
Reecy Aresty will result in thousands of links to sites all over
the world that feature his articles, advice and methods. Recently, he
created the College Information Network™,
which includes The High School Blog, The College Blog, PayLess For
College and The Way To College.
For almost three
decades, Reecy has helped thousands of families send their kids to the
college of their choice for less than they ever dreamed possible.
The critics agree. The way to college is Reecy Aresty's, How To Pay For
College Without Going Broke. It reveals the trade secrets and insider
information our colleges, universities and the federal government don't want you to know.
For
further information on the best college funding book on the market today,
click here. For more information on admissions and
financial aid - Ask Reecy!
