TUESDAYS WITH MIRIAM :: Preparing for Tax Season

Miriam is an Assistant Manager at a national banking institution. Her weekly posts will help you prepare for the financial realities of education and life. Be sure to leave a comment or send an email if you have specific financial questions.

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Preparing for Tax Season

It’s a new year!! What is the first thing that people start to think about? Their taxes!! In this weeks article I would like to just point out a few line items that you as a student and/or homeowner can take advantage of.

Students should look for deductions or credits that they can receive.

a. If you have a student loan that you are currently paying on you can deduct all or a portion of the interest that is paid on that loan. Detailed information is available in your tax instruction manual for the form that you will be using.

b. There is also a tuition and fees deduction. You cannot use both the tuition and fees deduction and education credits. Therefore, as you or your tax preparer are filling out the required worksheets, be sure to use the one that would make sure that you are required to pay the smallest amount of tax possible.

c. There are two education credits that you can look at. However, you are only able to take one and you cannot use the tuition and fees deduction and education credits for the same student in the same year. The first credit that can be considered is the Hope Credit. This tax credit cannot be used for more than 2 years for one student. You should refer to form 8863 for rules of calculating the Hope Credit. The second credit is the Lifetime Learning Credit. There is also a method on form 8863 to calculate the dollar amount of your credit. In addition, there are income caps. If you make over a certain amount you may not be able to take advantage of the credit.

Homeowners also have deductions that they can take to minimize the amount of taxes that they are required to pay. However, these deductions can only be utilized if you itemize. However, you should only itemize if the total amount of the deductions is greater than your standard deduction. If it is not, it will not be beneficial for you to itemize. If you have a mortgage on your home or paid points in 2008 then you will be able to input this amount on Schedule A of your tax forms.

As we continue to move through tax season I will post more information on how you can minimize the amount of taxes that you need to pay. If you have any questions or who like information on getting your taxes prepared feel free to contact me at mhornbuckle08{at}gmail.com.