- You can deduct any contributions you make to a Section 529 plan on behalf of yourself or for the benefit of anyone else. A Section 529 plan allows your money to compound tax free for as long as the money is held in the account. Any withdrawals are tax-free, provided the money is used for bona fide educational expenses.
- IRS rules allow you to withdraw money from your IRA or 401k to pay for college expenses for yourself or for your child, penalty-free. You avoid the 10 percent penalty on early withdrawals. However, withdrawals for educational purposes from these accounts are taxed as ordinary income.
- You can deduct the unreimbursed cost of classes and coursework required for your trade or profession, such as continuing education courses. You can deduct the cost of any education required for the maintenance of your license or to qualify for promotion within your profession. You cannot deduct education costs for programs that qualify you for a new profession, however.
- You can deduct up to $2,500 per year in interest on qualified student loans. To qualify, you must be legally obligated to pay the interest, and your filing status cannot be married filing separately. Your income must also be below the IRS threshold, which changes every year. As of 2011, the deduction allowance begins to phase out at an income level of $60,000 for single taxpayers and $120,000 for couples, and phases out entirely at income levels of $75,000 and $150,000 per year, respectively.
Section 529 Plan Contributions
IRA and 401k Contributions
Professional Education
Student Loan Interest Deduction
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