Back to School? Learn about Tax Credits for Education

education

If you pay for college in 2016, you may receive some tax savings on your federal tax return, even if you’re studying outside of the U.S. Both the American Opportunity Tax Credit and the Lifetime Learning Credit may reduce the amount of tax you owe, but only the AOTC is partially refundable. Here are a few things you should know about education credits:

  • American Opportunity Tax Credit ‒ The AOTC is worth up to $2,500 per year for an eligible student. This credit is available for the first four years of higher education. Forty percent of the AOTC is refundable. That means, if you’re eligible, you can get up to $1,000 of the credit as a refund, even if you do not owe any tax.
  • Lifetime Learning Credit ‒ The LLC is worth up to $2,000 per tax return. There is no limit on the number of years that you can claim the LLC for an eligible student.
  • Qualified expenses ‒ You may use only qualified expenses paid to figure your credit. These expenses include the costs you pay for tuition, fees and other related expenses for an eligible student to enroll at, or attend, an eligible educational institution.
  • Eligible educational institutions ‒ Eligible educational schools are those that offer education beyond high school. This includes most colleges and universities. Vocational schools or other postsecondary schools may also qualify. If you aren’t sure if your school is eligible:
    • Ask your school if it is an eligible educational institution, or
    • See if your school is on the U.S. Department of Education’s Accreditation database.
  • Form 1098-T ‒ In most cases, you should receive Form 1098-T, Tuition Statement, from your school by February 1. This form reports your qualified expenses to the IRS and to you. The amounts shown on the form may be either:  (1) the amount you paid for qualified tuition and related expenses, or (2) the amount that your school billed for qualified tuition and related expenses; therefore, the amounts shown on the form may be different than the amounts you actually paid. Don’t forget that you can only claim an education credit for the qualified tuition and related expenses that you paid in the tax year and not just the amount that your school billed.
  • Income limits ‒ The education credits are subject to income limitations and may be reduced, or eliminated, based on your income.

If you have any questions please do not hesitate to give us a call at our office, 314-993-4285.

This information was received from IRS Tax Tips Issue “IRS Summertime Tax Tip 2016-14”

Tips for Decoding Your Financial Aid Letter

Last week, we spoke about how important it was to dissect your financial aid award letters. Unfortunately, this is easier said than done due to the singular fact that they are written to be indecipherable.

decodingTherefore, the team at Hauk Kruse & Associates has done some research on your behalf. In our research, we came across an excellent Forbes article which maps out the 10 rules for decoding college financial aid award letters. Below, are the top 3 rules we believe to be most important. Please feel free to read the full article by Maggie McGrath here.

1. Your financial aid award isn’t necessarily all a gift.

While your financial aid letter may state a number associated with your “total aid award”, you need to make sure you read the entire letter. Normally loans have been mixed in with your scholarships and grants. This is where decoding skills come in handy.

Most of the time, the loans won’t jump out at you. These letters normally do not include interest rates, monthly payment schedules, or even the word “loan”. Look out for abbreviations such as “Fed Staff L” (Federal Stafford Loan), “Sub” (subsidized loan), and “Unsub” (unsubsidized loan).

Sample Letter

2.The “work study” amount is not guaranteed income.

As noted in the example above, often the “total award amount” does not just consist of grants and loans, but also of federal work study opportunities. Even though the letter may list a certain amount, it is not guaranteed. First, you have to get the job – which come on a first come, first served basis (act fast!). Then, you have to work the hours. And unfortunately, the amount of money listed in your letter isn’t always going to be the amount you receive.

3. Don’t take the school at face value for expenses.

Your school may give you an estimate of what they believe your expenses (books, supplies, travel from home to school, etc.), but it is not always correct. These estimates have been known to be a lot less than actual expenses. Therefore, you should budget according to your situation, not the school’s estimates.


If you have any questions on financial aid or need help with your FASFA, please call our office at 314-993-4285 or e-mail us at office@hkaglobal.com

 

5 Ways to Avoid Financial Aid Surprises

Tuition Up

College is a wonderful part of every young person’s life: it is where their passions are discovered and honed, where they make life-lasting friendships, where many meet their future spouse, and where they are shaped into the person that they were always meant to be.

Unfortunately colleges are both a business and, nowadays, a necessity. These two facts mean that colleges can up their fees and lower their aid with little or no consequences.

More often than not, colleges convince students to choose them by offering grants, discounts, and scholarships and then up their tuition and lower their aid each year.

So how do colleges get away with this?

  • Colleges normally issue “need based” scholarships. Meaning they only give the scholarships to those students whose family makes below a certain income.
  • The average American family goes through the same changes during a student’s college years:
    – one child in the family graduates from college
    – one parent gets a raise, second job, bonus, or promotion
    These two changes mean “higher income” for the family in the eyes of FASFA, meaning colleges can lower or eliminate their aid.

While this information may be disheartening, there are a few steps you can take to prevent this from happening to you.

1. Learn all you can regarding financial aid methodology.

It is important to learn how your family’s current and future circumstances effect financial aid, for example:

  • having multiple kids in college vs. one kid in college
  • retirement vs. non-retirement savings
  • divorce
  • remarriage
  • promotions
  • raises

This way you won’t have any surprises.

Troy Onink and Mark Kantrowitz have written excellent sources to start your financial aid research.

2. Carefully read your initial financial aid letter, making sure to understand every aspect of it.

It is important you understand two things when reading you financial aid letter:

  • How much money you are getting via grant, loan, and work/study money.
    – These are often presented together as one large sum.
  • If you are getting merit-based (you need a certain GPA to get the money) or need-based financial aid.

3. Research your college options to see their financial aid practices.

Using collegenavigator.com, you can view how much money colleges grant freshman versus how much money they grant all undergraduates (keep in mind this number includes freshman as well). This will give you an idea as to whether or not your college choices drop/lower financial aid as students become sophomores, juniors, and seniors.

4. Apply for scholarships and grants from outside programs every year.

If your college allows outside financial aid (without eliminating or reducing the aid they are giving you), you should apply for it as well. Keep in mind that they aren’t all just for freshman, so you can apply for financial aid throughout all four years of your college career. Remember that every scholarship or grant is more free money for you and free money is never a bad option.

5. Plan for tuition increases.

Tuition will always increase… while financial aid most likely will not. Therefore, you need to plan for a steady increase in payments over your four years.


If you would like to read more in-depth information, please read the Forbes article “How to Avoid the Disappearing College Financial Aid Trap”. If you have questions regarding these tips, financial aid, or FASFA, please call our office at 314-993-4285 or email us at office@hkaglobal.com

 

5 Things to Keep In Mind When Applying for College Financial Aid

First-Come-First-Served

1. File for financial aid as soon as possible after January 1st.

While the deadline for applying for financial aid isn’t until June 30th, there are several reasons why you should apply for financial aid ASAP:

  • Several states and many colleges have deadlines earlier than June 30th.
  • Several states award grants on first come, first serve basis until the funds deplete.
  • Many colleges award scholarships on first come, first serve basis as well.
  • Some colleges award more generous financial aid packages to students who apply earlier.

To view a complete list of state deadlines, click here.

2. Consider other financial aid sources.

The FASFA isn’t the only route you can go for financial aid. Make sure your student applies for outside scholarships and merit-based scholarships. Also, consider education tax benefits and private students loans.

3. Apply for financial aid every year, even if you weren’t awarded any the year(s) before.

The formulas used to determine financial aid amounts are very complicated and even the slightest change in family income or situation can cause a bump in the amount awarded to your student.

Some examples of factors that can have an impact on financial aid eligibility includes:

  • The number of children a family has enrolled in college
  • The student’s income, assets, and capital gains
  • The family’s income, assets, and capital gains
  • Marital status
  • Bonuses
  • Household size

4. Request a professional judgement review.

If you are going through an unusual situation, you can contact the college financial aid office and request a professional judgement review. You will be able to provide documentation and reasoning why your child requires more financial aid.

5. Lastly, know that Hauk Kruse & Associates can help you complete the FASFA.

We know that the FASFA is a difficult, time-consuming, bothersome thing to complete. If you have any problems filling it out, you can always ask us for help – it’s what we’re here for.


If you have any questions or would like help completing the FASFA, please feel free to call our office at 314-993-4285 or email us at office@hkaglobal.com

The Truth About “Need-Aware” Colleges.

In 2013, The George Washington University publicly admitted that they are a “need-aware” college. In other words, they factor in an applicant’s need for financial aid when need-blinddeciding if they will admit that applicant to their institution. Understandably, this revelation caused an uproar among students and their parents. While some had strong words for colleges, others scurried to try and foot the entire bill for their student’s college tuition.

Fortunately for colleges and students around the world, “need-aware” isn’t as bad as it sounds. Kal Chany, the author of the Princeton Review’s Paying for College Without Going Broke, explained the truth behind “need-aware” institutions and how it differs from those that are “need-blind”.

The first step is to realize that “need-aware” does not mean that colleges are going to first accept all the children who don’t need financial aid and then everyone else. When a college institution is “need-aware”, financial need is only one factor – and this one factor normally only comes into play for students who are high-need and we’re the strongest candidates.

With this in mind, there is really no need to worry about whether the college your student is applying to is “need-aware” or “need-blind”. As long as your student is applying to colleges in which he/she is in the top 20%, there should really be no need for the financial factor to come into play.


If you would like to read more about this, check out the Forbes article “Does Applying for Financial Aid Hurt Your College Admissions Chances?”. If you have any questions financial aid or the FASFA, please call our office at 314-993-4285 or e-mail us at office@hkaglobal.com

3 Reasons The New College Trend Is Great For You!

Dream CollegeStudents who have dreamed of going to ivy league university such as Harvard and Yale have found an easier, cheaper way of getting there… starting at a local college! Many of these students attend a local university for their Bachelor’s degree, and move on to their dream college for their Master’s (and even PhD’s!).

This simple idea is great for you and your student for 3 big reasons:

  1. You’ll save money.
    Most “dream colleges” are expensive to attend. Attending a cheaper local college for their first four years means less money spent in the long run.
  2. Weaker candidates have time to become strong candidates.
    Ivy league universities have high standards. Therefore, if your student can achieve a Bachelor’s degree with a 4.0, they will most likely be shot to the top of the applicants when they apply to their dream college.
  3. Acclimating to the college life is easier.
    No matter how well they did in high school, university academics are on a whole different level. Attending a less stressful, less rigorous local college can be a great way for them to wade into the college lifestyle.

If you have questions on how college can affect your taxes, you need advice on financial aid, or you need help filing the FASFA, give us a call at 314-993-4285 – or e-mail us at office@hkaglobal.com