For current and upcoming college students, it is important to complete the “Free Application for Federal Student Aid” or FAFSA. This form is required for grants, federal student loans, and merit-based scholarships offered by many colleges and universities. Many students and their parents think they won’t qualify for any aid or grants due to their income, but you shouldn’t assume that as you may miss out on free money!
For the 2019-20 school year, you can file the FASFA starting on Oct. 1, 2018 through June 30, 2019, which is three months longer than in the past. For taxable income, you can also now use your 2017 income tax return that was just filed this year. In previous years, you had to wait until you filed the current year’s tax return, so this is another convenient change for parents and students when completing the FASFA form. Although you have until next June to file your FASFA application, I suggest filing ASAP, as some colleges have earlier deadlines for making financial aid determinations.
FASFA needs to be completed every year, so if you completed your FASFA application last year, you still must complete it again this year. Click on this link to start your FASFA application https://fafsa.ed.gov/.
Potential Tax Breaks for Parents and Students College expenses also means potential tax breaks for parents and students. This year, the Tax Cuts and Jobs Act (TCJA) includes many tax law changes, but college tax breaks are still available, which I have listed below:
The American Opportunity Credit: Covers up to $2,500 of the first four years of undergraduate college expenses – $100% of the first $2,000, plus 25% of the next $2,000. In addition, 40% of this tax credit is a refundable credit, meaning if you have a zero tax liability, you could still receive up to a $1,000 tax refund.
This credit covers tuition and fees, and required course materials, which can include a computer if the computer is required to take the course. You also must be enrolled at least half-time in a degree program.
Lifetime Learning Credit: Covers up to $2,000 for graduate school and other miscellaneous courses for an unlimited number of years (up to 20% of up to $10,000 in expenses). You must attend a qualified educational institution for the above credits to qualify.
One of the biggest obstacles is the income phase-out limits, so check with your tax preparer. Even you if you do not qualify due to income limitations, your child may be able to take advantage of the credit, assuming they have taxable income for the credit to be a benefit to them. If so, your child cannot be claimed as your dependent on your tax return, but since you do not get a dependent exemption under the new tax law, this will not be a tax loss to you.
College expenses can be very costly, so you want to do everything you can to reduce those costs when possible. Good Luck!