KANSAS CITY, MO - (Marketwire - Aug 1, 2012) - Considering the confusion surrounding diminishing tax breaks and tax-free ways to pay for school, H&R Block (NYSE: HRB) shares how parents and students can make smart tax and saving choices for education expenses. Some of the most commonly overlooked tax breaks are for education.
With 6 in 10 parents planning to spend an average of $218 on electronics this back-to-school season1, it looks like computer tablets are joining paper tablets on school supply shopping lists. With this increase in spending, many will need to find ways to save money, and one place to start is with tax breaks.
"Aside from catching a sale on school supplies and shopping on sales tax holidays, saving on education costs takes some knowledge and planning," said Kathy Pickering, executive director of The Tax Institute at H&R Block. "Education savings accounts can be set up now to fulfill a variety of needs in the years to come. Taxpayers also should start saving paperwork and receipts now that serves as documentation for education tax credits and deductions they claim on their tax return next January."
For some taxpayers, knowing what tax credits and deductions they are entitled to can make the difference between owing taxes and receiving a tax refund. The following are frequently overlooked education tax breaks:
Among the tax laws that expired in 2011 is the Tuition and Fees Deduction. If it is extended for tax year 2012, eligible taxpayers will be able to deduct up to $4,000 (not itemized) from income for high school and college students taking college or graduate courses.
Following are some popular ways to save for education and get tax benefits, such as tax-free distributions when used only on education expenses:
Saving for college and taking out loans are common ways to pay for education. For some, scholarships pay all or part of their expenses.
Generally, scholarship, grant and fellowship money is tax-free if a degree-seeking student uses the money to pay for expenses, such as tuition, fees and required textbooks. Scholarship income awarded specifically for room and board is not tax-exempt. Additionally, any scholarship or grant money paid as compensation for services rendered is considered wage income and is fully taxable.
For more information about education tax breaks, contact an H&R Block tax professional. To find the nearest H&R Block office, visit www.hrblock.com or call 800-HRBLOCK.
Many states are holding sales tax-free days prior to the start of the fall school semester. This is another great way to save.
H&R Block, with 4,000 offices open year-round, At Home ® online and the all-new, face-to-face web solution Block Live(SM), offers taxpayers multiple options to meet their filing obligations. Taxpayers can call 800-HRBLOCK for more information or visit www.hrblock.com to find an office near them, start their return online or log in to Block Live.
1 National Retail Federation
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