prepaid legal services business opportunity – Tax credits for college grow, cover more students – Yahoo! News
Tax credits for college grow, cover more students – Yahoo! News
WASHINGTON – College students or their parents have a new opportunity to get a tax credit for college expenses.
Barbara Weltman, author of two J.K. Lasser tax guides, calls the American opportunity tax credit a “new and improved” version of the Hope credit.
The maximum annual credit — $2,500 — is bigger than what was available under the Hope credit and the income eligibility has been eased somewhat. Also, it’s available to students for the first four years of post-secondary education; the Hope credit could be used only for the first two years. Students also must be enrolled at least half-time.
On top of that, 40 percent of the credit is refundable. “You get the credit back even if it’s more than you owe,” Weltman said.
Congress created the new, temporary credit as part of legislation designed to help the economy crawl out of a deep recession. It is available for both the 2009 and the 2010 tax years.
“This is the better credit to go for if you qualify,” said Jeff Schnepper, MSN Money tax expert.
To claim the maximum credit, a student would have to spend $4,000 on qualifying expenses, including tuition and fees. Eligible expenses also include the cost of course materials, including books, something not allowed under the Hope credit.
The credit begins phasing out for individuals whose modified adjusted gross income is more than $80,000, or $160,000 for married couples filing jointly.
If you’re not eligible for the American opportunity credit, there may be other options that have the effect of reducing the cost of going to college:
_Lifetime learning credit: Undergraduates in their fifth or sixth year of study, students attending school part-time and graduate students may be eligible for a lifetime learning credit of up to $2,000.
Similar to the American opportunity and Hope credits, the lifetime learning credit phases out for people with higher incomes. Taxpayers may not claim both the American opportunity and the lifetime learning credits for the same student in the same year.
_Tuition deduction: Also available to taxpayers is a deduction of up to $4,000 for eligible tuition and fees for higher education. The deduction is available both to people who itemize and those who claim the standard deduction, but there are income eligibility limits. You cannot claim the tuition and fees deduction for a student if you or anyone else claims an education tax credit for that student in the same year.
Unlike a credit, which reduces actual taxes owed, a deduction reduces the income on which your taxes are computed.
_Deduction for interest paid on student loans: A maximum $2,500 deduction can be taken for interest paid on student loans. To qualify, an individual’s modified adjusted gross income must be less than $75,000. The income limit on a joint return is $150,000.
_Business deduction for work-related education: To qualify, the course or class must be required by your employer for your present job or related to it. You cannot deduct education expenses incurred to train for a new position. The cost of education related to your job would be included in the miscellaneous column of your itemized deductions. To take the deduction, the total of all miscellaneous deductions must exceed 2 percent of your adjusted gross income. Self-employed people may subtract the expense from their income.
Alternatively, workers and self-employed people who take courses to acquire or improve job skills may instead qualify for the lifetime learning credit.
In another change affecting parents and students for tax years 2009 and 2010, money may be withdrawn from a tax-free college savings or prepaid tuition plan to cover the cost of computers, educational software or internet access while a student is in college. Distributions under the so-called 529 plans are not taxed. Previously, the qualified expenses did not include computer equipment or internet access.
When you need an attorney or a legal form prepared, chances are that you go out and look for the proper legal representation at that time. With a prepaid legal services plan, you don’t have to find an attorney on short notice. You plan ahead for possible legal needs and pay up front to have an attorney on call. This can save you hundreds of dollars in attorney fees over the course of a year.
Legal plans that are prepaid can come in several popular formats. One plan provides access to a network of lawyers who give you discounted price on their services. This is similar to a health maintenance organization formed by a group of doctors. When you require a lawyer’s services, you contact the network and are referred to a legal specialist.
Often, a legal services plan will include the offer of one or more legal documents prepared for you at no additional cost. A simple will or a deed is an example of the types of free legal documents available. Preparation of one such document can offset the monthly fees for several months.
Another type of prepaid legal plan includes an entire library of legal documents that you can access at no additional fees. Forms in the library are generally the more basic forms such as rental agreements, bills of sale or sales contracts. If you use a lot of legal forms, this plan may represent a real cost savings.
You should choose a legal plan that provides the services you are most likely to require during the next few months. Setting up a business might require a lot of attorney advice and legal forms. If you are creating rental agreements for clients, a plan that provides legal forms will be of more value to you. Many people don’t plan to use the services of an attorney, but if you have the need, it’s better to have a prepaid plan available.
It is important to have an attorney that you feel comfortable with, as well as one that has the experience and knowledge to successfully represent your interests. This is true whether or not the services of the attorney are prepaid. Check the contract for services if you are considering the purchase of a specific plan to see whether it covers complicated legal representation and whether you have the right to change attorneys if you are not satisfied with the first one.
A plan that provides you with a number to call in the event of an arrest can be very helpful in arranging legal counsel immediately. Police are more likely to follow all the rules if they know you have legal representation. A prepaid legal adviser makes certain you know what your options and responsibilities are.
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