individuals and these individuals have the right
to tell the caregivers what needs to be done. For self-employment income
earned in 2013 and 2014, the self-employment tax rate is 15.3%.
Tax Benefits for Education
Tax credits, deductions and savings plans can help
taxpayers with their expenses for higher education.A tax credit reduces the amount of
income tax you may have to pay.A deduction reduces the amount of your income that is subject to
tax, thus generally reducing the amount of tax you may have to pay.Certain savings plans allow the accumulated earnings to grow
tax-free until money is taken out (known as a distribution), or allow the
distribution to be tax-free, or both.
An exclusion from income means that you won't have to
pay income tax on the benefit you're receiving, but you also won't be able
to use that same tax-free benefit for a deduction or credit.
An education credit helps with the cost of higher
education by reducing the amount of tax owed on your tax return. If the
credit reduces your tax to less than zero, you may get a refund. Thetwo education credits available are the
American Opportunity Tax Credit and the Lifetime Learning Credit.There are additional rules for each
credit, but you must meet all three of the
qualification rules for the two credits. First, you, your dependent or a third party pays
qualified education expenses for higher education. Second, an
eligible student must be enrolled at an eligible educational institution.
Third, the eligible student is yourself, your spouse or a
dependent you list on your tax return.
If you’re eligible to claim the lifetime learning
credit and are also eligible to claim the American opportunity credit for
the same student in the same year, you can choose to claim either credit,
but not both. You can't claim the AOTC if you were a nonresident alien for
any part of the tax year unless you elect to be treated as a resident alien
for federal tax purposes.
The Tuition and Fees Deduction expired Dec. 31,
2013. You may claim it on your tax year 2013 or prior years' tax returns.
Under current law, the deduction is not available for tax years after 2013.
You may be able to deduct qualified education expenses paid
during the year for yourself, your spouse or your dependent. You cannot
claim this deduction if your filing status is married filing separately or
if another person can claim an exemption for you as a dependent on his or
her tax return. The qualified expenses must be for higher education.The tuition and fees deduction can reduce
the amount of your income subject to tax by up to $4,000. This deduction,
reported on Form 8917, Tuition and Fees Deduction, is taken as an adjustment
to income. This means you can claim this deduction even if you do not
itemize deductions on Schedule A (Form 1040). This deduction may be
beneficial to you if, for example, you cannot take the lifetime learning
credit because your income is too high.
You may be able to take one of the education
credits for your education expenses instead of a tuition and fees deduction.
You can choose the one that will give you the lower tax.Generally, you can claim the tuition
and fees deduction if you pay
qualified education expenses of higher education, you pay the education expenses for an
eligible student, and
the eligible student is yourself, your spouse, or your dependent
for whom you claim an exemption on your tax return.You cannot claim the tuition and fees
deduction if your filing status is married filing
separately, if another person can claim an exemption for
you as a dependent on his or her tax return (you cannot claim
the deduction even if the other person
