You are going to college, are a student now, or have already graduated. Either way, you know perfectly well what it is to pay for college and your tuition. You learn it first-hand or have heard that in the academic year 2020/2021, public, in-state colleges are the cheapest. They cost $9,687. Public, out-of-state colleges are much more expensive. You will need to pay $21,184. If you decide to study at a private college, you will have to pay $35,087 per year.
It is a well-known fact that college can hit family finances. Especially when a person wants to move up their ladder of education like becoming a Masters’s student. They realize that education prices may increase in the future and understand that some people should be ready for this situation when their children go to college where they can also seek help from online essay writers service to help them with academic assignments. Thus, it is a good idea to conduct research and learn more about smart ways to help your kids pay for college.
Tax-Smart Way #1: Section 529 plans
Some people have been investing in the Section 529 plan for several years. In the first place, they could decrease their taxes officially. Each state may have a different plan, but the benefits for a child are always the same. When the child reaches the age of 19, they can use the money that their parents collected in a separate account.
Benefits:
- only the person for whom the account was opened can spend money;
- interest is charged and capitalized on the funds in the 529 plan;
Limitations:
- A child can only study in colleges and universities in the United States. If the plan is to study outside the USA, one should find educational institutions authorized for the 529 plan outside the United States;
- Funds can be spent on other non-academic purposes, but then taxes and a fine (usually 10% of the amount) will need to be paid.
Adaptation Way #1: Scholarships
Alongside tax-related ways, we decided to study other options equally accessible to all. As it has long been accepted, good academic performance is encouraged by many universities. Some people decide to make up a plan according to which they put off part of the scholarship for their future kids. They can’t invest in a 529 plan because they do not have children yet. They also do not have a fiancé, but they understand that the financial part of the issue needs to be dealt with long before. Many people can do the same thing; all that remains is to choose a suitable college or university with a great scholarship.
Tax-Smart Way #2: Gift-tax break from 529s
Do not forget about taxable amounts and a way to receive a gift-tax break. One should remember that if their contributions, plus any other gifts to a particular beneficiary, exceed $ 14,000 per year, they may be taxed. A way to avoid the tax is simple: annual contributions per beneficiary must not exceed the indicated amount per year. But! It is allowed to contribute for the next 5 years (i.e., $ 75,000). If taxes are filed as “married filing jointly”, then all limits double. As a result, parents have a gift-tax break, whereas a child has money for higher education.
Adaptation Way #2: Education online
Whoever and whatever says, but money is important. Due to certain circumstances, many students had to spend the whole semester on distance learning. Some of them decided to continue such a type because it is more convenient. During this time, they realized that they had saved a good amount of money because they did not have to spend money on a road to the university, a room, and textbooks. Although it was difficult for them to align their usual curriculum, they understood that study online can be an excellent solution for people who are used to or know that they will easily get used to such a lifestyle.
Tax-Smart Way #3: A tax credit for tuition payments
Some students are aware of the possibility of receiving a tax credit for tuition payment. When they are getting a Bachelor’s degree, the American Opportunity credit can cut their parents’ tax bill to $1,500. Though, they can cut the tax bills up to $ 2,500 per student.
We have noted the following:
- one should spend at least $4,000 in tuition and qualified expenses (on books, course materials, etc.);
- the modified adjusted gross income should be below $160,000 if married filing jointly or $80,000 if single;
- the student should be dependent; thus, the tax credit applies to parents only.
Also, only the first four years of college are counted.
Adaptation Way #3: Investigate
Sometimes, to save on education, one needs to be creative. For example, one needs to consider all possible options and understand what will help them finish their education as soon as possible. It is quite a logical solution because the fewer one studies, the less one pays. It is not a story for students who are going to get their Master’s degree a few months from now. But to those who can’t receive a tax credit for tuition payments, we can advise them to study other ways to get a university degree easily.
Tax-Smart Way #4: Pay tuition directly to the college
There is another way to save on education we have learned about – the one popular among grandparents. These are direct payments to an educational institution. Thus, the payment is excluded from the annual gift-tax limit, and grandparents can give their grandchildren extra money. At the same time, this only applies to tuition payments. Accommodation fees are not excluded from the annual gift-tax limit.
Adaptation Way #4: Startups
We know very well that an alternative way can interest ambitious students. It is quite simple and rather difficult at the same time: to come up with and develop one of the college start-up ideas. For instance, if a person likes to embroider, they can focus on depicting images from popular fandoms on T-shirts. Choose something your soul likes. And remember: any idea can be a successful one if a person lives by it and wants to develop it.