College Planning Flashcards
Education Funding Needs Analysis
- Determine the cost of the first year of college
- Determine the amount that must be available at 18 inflation adjusted
- Determine what is needed in lump sum now (PV beg or end) or payments deposited (PMT).
College Savings 529 Plan
Type of QTP established and maintained by the state after tax contributions deferred growth must be used for qualified expenses to avoid additional tax and penalties may include a state tax deduction $14,000 per individual/per bene/per year Can fund 5 years - $70,000 couples $140,000
Coverdell ESA
$2000 per year per student by tax filling date
contribution not deductible/ grow tax deferred
distributions tax free qualified education expenses
student < or =18
Phaseout Single $95,000-$110,000
Married $190,000-$220,000
Can use for elementary and high school
broad range of expenses covered
funds must be used before 30 (30 day grace period)
can be rolled to another family member
generally considered assets of parent even if parent is not owner
tuition, fees, tutoring, special needs services, extended day programs, supplies, equipment, room and board, uniforms, transportation. Also computer, technology internet used by bene or bene’s family whole in school.
UGMA
Uniform Gift to Minors Act Can hold investments no real estate age maturity 18 or 21 depending on state present interest gift ($14000 exclusion) subject to kiddie tax (< or = 24) Assets count against child (owned by child)
If transferred to 529 (if allowed) child is still owner
UTMA
Uniform Transfers to Minors Act Can hold investments can hold real estate age maturity up to 25 present interest gift ($14000 exclusion) subject to kiddie tax (< or = 24) Assets count against child (owned by child)
If transferred to 529 (if allowed) child is still owner
Kiddie Tax
Have more than $2100 of unearned investment income.
Child $1050 standard deduction, next $1050 taxed at 10%
Remainder at parents marginal rate (up to 39.6%)
*Thekiddietaxdoesnotapplytochildrenwho:
-are19to23andnotfull timestudents;
-providemorethan halfoftheirownsupportfrom
earnedincome;
-areover 24andstilldependentsoftheirparents;
-orunder 24butmarriedandfileajointtaxreturn.
Thesechildrenare alltaxedlikeadultsat
theirowntaxrate.
Series EE/I Bonds
To fund education expenses
Normally purchased in parents name (anyone but student 24+)
Never issued in name of child or custodial act
Must be redeemed in year owner pay college expenses (tuition and fees ONLY no room and board)
Interest exempt from Fed income tax only
Phaseouts:
MFJ -$116,000-$146,300
Single- $77,550-$92,550
In UTMA interest is taxable
American Opportunity Tax Credit
Tax credit for 100% of first $2000 and 25% of next $2000 of tuition, fees and course material ($2500max).
Phaseout S $80,000-$90,000
MFJ $160,000-$180,000
Conditions:
- First 4 years of post secondary education
- At least 1/2 time student
- Can’t be used with lifetime learning credit
- Expenses paid with grants and scholarships don’t qualify
- felony drug convictions restriction
- no room and board expenses
*New 2014 Allows above the line deduction alternative:
$4000 deduction for MAGI up to $65,000 S and $130,000 MFJ
$2000 deduction for MAGI up to $80,000 S and $160,000 MFJ
Lifetime Learning Credit
Per period, not per student (per taxpayer for all eligible students)
20% of first $10,000 ($2000 max)
Conditions:
- no particular course load
- does not need to be seeking a degree (can be for a class) grad or undergrad
- unlimited period
- no felony drug conviction restriction
- no room and board expenses
Phaseouts S $55,000-$65,000
MFJ $111,000-$131,000
*can be used with AOC as long as not on same student
Student Loan Interest Deductions
Above the line deduction “qualified’ education loans
Max $2500
Phaseouts S $65,000-$80,000
MFJ $130,000-$160,000
Pell Grant
Government grant
Undergrad only - no previous degree
Based on need (EFC)
At least 6 or more credit hours
Cost-Expected Family Contribution (EFC) = Need
AGI under $60,000
Parent Plus Loan
Undergraduate Students
Wealthy families
Can borrow entire college cost and living expenses
Based on credit score
Payment due within 60 days of disbursement
Perkins Loan
Need based college decides Up to $4,000 grad or undergrad to total $20,000 Subsidized 9 mo grace period no longer student Grad and Undergrad
Subsidized Stafford Loan
Need Based
Pell grant, EFC and all other aid subtracted from cost first
Grad and Undergrad
Federal Supplemental Education Opportunity Grant
Exceptional Financial Need
Available to Pell Grant Recipients
Up to 4k
