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Financial planning for college after the divorce and taxes
Financial planning for college after Divorce and taxes
2009 and 2010 brought many changes to the structure of tax credits and deductions in the federal system. Today I would like to draw attention the American Opportunity Tax Credit. The American Credit Opportunity expanded and renamed the Hope Credit for years 2009 and 2010 the tax. Credit expansion increases the total available credit to $ 2,500 per year for the first four years of postsecondary education. This is an increase of $ 700, on credit old hope. The Hope credit was also applicable only the first two years of school. Add $ 700 per year and two years of additional credit eligibility Value of the development of new, plus an additional $ 6,400.
How I can get credit?
The American Opportunity Credit provides 100% credit on the first $ 2,000 of tuition, fees and course materials paid during the fiscal year plus 25% of the next $ 2,000. To be eligible for credit for a married filing jointly must have modified adjusted gross income under $ 180,000. Between $ 160,000 and $ 180,000 by eliminating to apply. Cut the dollar amount in half for single filers. The Hope credit completely eliminated $ 116,000 for married taxpayers and $ 58,000 for a single.
How does the tax credit?
A tax credit is a dollar for dollar reduction total tax for a given year. American Opportunity Tax Credit is a refundable tax credit. This is not true for many loans, which means that if the results of credit an overpayment of tax, up to $ 1,000 can be reimbursed directly to you. The credit is available per student.
Note …
Starting today, the American Opportunity Tax Credit provides only 2009 years to implement fiscal 2010. Only we can speculate on whether extended or return to the original credit expectancy. Vote Hope has been available only to those who claimed the student as a dependent in income tax, regardless of who paid the fee. This leaves "non-custodial" parents in the cold as the claim relates. A parent you paid $ 4,000 for tuition and for your child and met with the AGI limits would be entitled to a credit of $ 2,500. If that same father divorced and decided to allow your ex-spouse to claim dependent children for tax purposes, they lose the tax credit. It is clear to me if the status of the remaining dependence U.S. credit opportunities to all published material, I found the question left unanswered.
Divorce Financial Planning
Planning dependency exemptions and other tax issues is an integral part of financial planning for divorce. IRS allows the transfer of exemptions a dependency "non-custodial" parents with Form 8332, but did not allow a "custodial" parent to look for new tax credits for children related to this day. This makes a discussion of the subject is necessary in cases where children are concerned. Understanding the tax credits and deductions and planning that can maximize the value to your family is part of the divorce financial planning. Not to consider the American Opportunity Tax Credit alone could give $ 5,000 per child in the table and potentially more if it has spread beyond 2010.
Consider the following family
twin sons 18 years full-time students. It just started the first year at the University in September 2009, a University of A, the other University B. The parents are going through a divorce and a plan to split the cost of educating children in the first cycle schools as well.
Suppose that each unit exemption is worth $ 3.650 in 2009, 2010, 2011 and 2012.
Suppose that the U.S. Opportunity Tax Credit is worth $ 2,500 per student in 2009 2010.
Suppose that the Lifetime Learning Credit is not helpful for either party, for exceeding the limits of the elimination in 2011 and 2012 and credit of hope is still available for the first two years of college only.
Assuming that each parent is 28% effective tax rate, the value of dependency exemption and American Opportunity Tax Credit and the period of four years is $ 18,176. A failure to negotiate these issues in their divorce proceedings leaving money on the table.
Additional funds and deductions subject to a child care system include the child tax credit, education and deduction fees, credit and income. Not discuss these in this analysis.
Conclusion
This type of planning is useful to any person with children not only those going through divorce. Our sister company, Pacific Wealth Management provides financial planning services, including financing strategies for individual schools and families.
Our company does not provide legal or tax advice. Be sure to consult their own tax and legal advisors before taking any action may have tax consequences.
About the Author
Pacific Divorce Management’s mission is to help couples address the legal, emotional, and financial aspects of divorce in a civilized, equitable, and efficient manner by providing expert divorce financial planning advice.
Justin A. Reckers CFP®, CDFA™
858.509.2329
jreckers@pacdivorce.com
National Brotherhood of Fathers Rights
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