September 10, 2022 | Posted in:

Smart Tactics for Conquering College Costs

As a parent, I have seen the benefit of saving early in a 529 plan to manage college costs and limit student loans. Over time, the 529 college savings account can provide tax-deferred earnings growth, and withdrawals are tax-free when used for qualified education expenses. Contributions to 529 plans can be made by relatives and friends and some states even provide income tax deductions for contributions.


Saving for college is a daunting task, but there are other ways to conquer the high cost of college in addition to 529 plans.


Education tax credits

These can help provide tax savings for college costs that are not paid for with 529 funds. Here are two of the most popular (1) the American Opportunity Tax Credit which is worth up to $2,500 per eligible student for each of the first four years of college or vocational school. (2) The Lifetime Learning credit is worth up to $2,000 per tax return, per year. It is available for all years of postsecondary education and for courses to acquire or improve job skills.


Community college

Many money-conscious students are choosing to live at home and spend their first two years at a community college. Doing so can save tens of thousands of dollars or more.


Tax deduction

Don’t forget to take a deduction for student loan interest. You can deduct $2,500 if you are an individual making up to $70,000 or less (adjusted gross income) and up to $145,000 for married taxpayers filing a joint return. Unfortunately, if both taxpayers have student loans, the maximum is still $2,500.


See Also: Major Student Loan Relief Announced and Are Business Education Courses Deductible?


Kim Sheehan,  CPA/PFS


Associate Partner
Kim has developed a primary focus on providing accounting, tax, and advisory services to the professional service area, including law firms and medical practices.
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