Tax planning for college students
Come tax-time you may have some student loan interest to deduct. CPA and TurboTax expert Lisa Green-Lewis explains how recent legislation effects borrowers.
Transcript
00:00 (upbeat music)
00:02 - So it's that time of year,
00:05 if you have kids going back to college,
00:06 you're starting to buy dorm supplies
00:08 and find sheets for their beds.
00:10 But don't forget, Uncle Sam offers a bunch of tax breaks.
00:13 Lisa Green Lewis, triple tax expert and CPA
00:16 is with us now to talk through them.
00:17 So Lisa, first, let's start with the new legislation.
00:20 What do we need to know?
00:21 - The first thing you need to know
00:24 is that the freeze on paying your federal student loans
00:29 is off.
00:31 And starting September,
00:33 you're gonna start seeing interest in your account.
00:38 And then you have to start making payments in October.
00:41 So that's a key thing to remember
00:43 because that pause was on for a couple of years
00:46 due to COVID.
00:48 And then another key piece of legislation
00:51 that came up on June 30th is the Supreme Court,
00:56 they did block the student loan relief
01:00 that was up to $10,000 for federal student loans
01:05 and $20,000 for Pell Grants.
01:08 So that is blocked right now.
01:10 - So just as a reminder too,
01:12 kids don't have to start paying these loans back
01:13 until they finish with school, right?
01:15 So there's no need to panic just yet.
01:17 - Yeah, it depends on your loan,
01:19 but in some cases, yes,
01:21 they do allow a certain amount of time
01:24 after you finish school.
01:25 I think it's up to six months after you finish school,
01:29 'cause I guess they wanna give your kids time
01:32 to find a job and everything.
01:35 - Right, 'cause otherwise parents have to pay the bill.
01:38 So again, God bless Uncle Sam on that one.
01:40 But so check your loan, that's super important.
01:43 Let's now talk about these education credits
01:45 that people often forget.
01:47 American Opportunity is the first one.
01:49 I think people leave these on the table a lot.
01:52 - Yeah, they do.
01:52 A lot of people are unaware of them
01:54 and the American Opportunity Tax Credit,
01:57 that's for up to your first four years of college
02:01 and it's up to $2,500.
02:03 And then the Lifetime Learning Credit,
02:05 that can be, it doesn't have to be
02:08 your first four years of college.
02:10 It's actually after your four years
02:11 and it can be for one class.
02:14 So that is one thing to remember
02:16 for students as well as parents.
02:18 - And the final thing we should talk about
02:21 is who takes these credits?
02:22 Is it the kids?
02:24 Is it the parents?
02:25 I guess it depends.
02:26 - Yes, I always recommend having a conversation
02:31 about who would be eligible
02:32 because these are income-based credits.
02:36 And so a lot of times parents don't even qualify
02:39 but they're claiming their child as a dependent.
02:42 So their child can't claim these credits.
02:45 But if you're not getting any benefit
02:48 from claiming your child because of your income,
02:51 then you should have your child file their taxes,
02:55 especially a lot of college students,
02:57 they work side jobs,
02:59 but they think they don't make enough money to file
03:01 because they're not at the IRS income threshold.
03:05 But they're leaving money on the table,
03:08 especially if they had federal taxes taken out
03:10 and they're eligible for these education tax credits.
03:14 - Yeah, that's certainly a conversation
03:15 I'm gonna be having with my son
03:17 who just graduated this year.
03:18 Lisa Green-Lewis, TurboTax expert in CPA.
03:21 Thank you so much for all of that.
03:23 - Thank you for having me.
03:24 (upbeat music)
03:27 (upbeat music)