Education Funding Vehicles & Wealth Building

Now is the time to avoid student loan debt

Learn how you can fund your and your loved ones education so that you can build wealth efficiently and achieve more during your lifetime…

More on Education Funding…

As the year ends and families gather around the table, the topic of education funding for a planned child, a newborn, a child whether toddler or teen will be on the minds of many.  As many are in a gift giving mood at this time it is also important that you consider the gift of zero debt to yourself and your loved ones as higher education is pursued.


Ok, it’s really not a gift as you will have to contribute funds now to make the reality of student loan debt non-existent–or at least more manageable as you move along at the various stages in your life.


In this discussion will look at ways that you can possibly fund your child’s education (or a love ones–or your own) in a manner that can get you ahead financially and do so in a comprehensive manner. will begin each topic of discussion by defining the funding vehicle or educational credit so that we are all on the same page. will then try to be as concise as possible, however your patience is requested as there are a number of funding vehicles that must be focused on if you are to get the most out of your educational planning efforts. will further look at educational funding vehicles along with tax benefits that are available to possibly help you fund your, your child’s or a loved ones future educational costs in a more effective and efficient manner by looking at the key aspects of numerous funding vehicles along with the tax angles that may work for or against you in many of those funding vehicles.


American Opportunity Credit


American Opportunity Credit–A nonrefundable credit of up to $2,500 for qualified education expenses paid for each eligible student. The AOC is available for the first four years of postsecondary education to those (or parents of) who are in the pursuit of an undergraduate degree.

The AOC is generally the most effective education credit for most–however income limits and other caveats may apply making it sometimes difficult to know if it is the best choice.

In many cases you (or your tax professional) may have to run the numbers to see which credit is more appropriate for you and your family based on your unique tax filing.

For 2018, you may be able to claim a credit of up to $2,500 for adjusted qualified education expenses paid for “each” eligible student who qualifies for the American Opportunity Credit.

A tax credit reduces the amount of income tax you may have to pay. Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself.

“Forty percent of the American Opportunity Credit may be refundable.”

This means that if the refundable portion of your credit is more than your tax, the excess will be refunded to you.  Your allowable American Opportunity Credit may be limited by the amount of your income.

Also, the nonrefundable part of the credit may be limited by the amount of your tax.

Maximum credit: up to $2,500 credit “per eligible student” calculated as 100% of the first $2,000 of qualified educational expenses and 25% of the next $2,000 that is paid for each eligible student.

Other key points:

Limit on modified adjusted gross income (MAGI) $180,000 if married filing jointly; $90,000 if single, head of household, or qualifying widow(er).

Number of courses: student must be enrolled at least half time for at least one academic period that begins during 2018 (or the first 3 months of 2019 if the qualified expenses were paid in 2018).

As of the end of 2018, the student had not been convicted of a felony for possessing or distributing a controlled substance.

Qualified expenses: tuition, required enrollment fees, and course materials that the student needs for a course of study whether or not the materials are bought at the educational institution as a condition of enrollment or attendance

Payments made in 2018 for academic periods beginning in 2017 and in the first 3 months of 2019 (TIN needed by filing due date).

Filers and students must have a TIN by the due date of their 2018 return (including extensions).

Educational institution’s EIN–You must provide the educational institution’s employer identification number (EIN) on your Form 8863.

Can you claim more than one education credit this year?

For each student, you can elect for any year only one of the credits.

For example, if you elect to take the American Opportunity Credit for a child on your 2018 tax return, you cannot, for that same child, also claim the lifetime learning credit for 2018.


Lifetime Learning Credit


Lifetime Learning Credit – A nonrefundable credit up to $2,000 ($4,000 if a student is in a Midwestern disaster area) per return for qualified education expenses for all years of post-secondary education and for courses to acquire or improve job skills.

The Lifelong Learning Credit can be used by those who obtain higher education and can be a good choice if the American Opportunity Credit (AOC) or Tuition & Fees Deduction are not available because qualifications are not met.

For the tax year, you may be able to claim a lifetime learning credit of up to $2,000 for qualified education expenses paid for all eligible students.

There is no limit on the number of years the lifetime learning credit can be claimed for each student.

A tax credit reduces the amount of income tax you may have to pay.  Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself.

The lifetime learning credit is a nonrefundable credit.

This means that it can reduce your tax to zero, but if the credit is more than your tax, the excess will not be refunded to you.

Your allowable lifetime learning credit may be limited by the amount of your income and the amount of your tax.


Tuition & Fees Deduction


When figuring an education credit or tuition and fees deduction, use only the amounts you paid and are deemed to have paid during the tax year for qualified education expenses.

In most cases, the student should receive Form 1098-T from the eligible educational institution by January 31, 2019.  However, if amount differs from what you actually paid—used the amount that you actually paid.

To be eligible to claim the American Opportunity Credit or the lifetime learning credit, the law requires a taxpayer (or a dependent) to have received Form 1098-T, Tuition Statement, from an eligible educational institution.

The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000.

This deduction is taken as an “adjustment to income” and is not a credit but will lower your taxable income.

You can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040).

This deduction may be beneficial to taxpayers who “do not qualify” for the American Opportunity or lifetime learning credits.

What is the maximum benefit?

You can reduce your income subject to tax by up to $4,000.

What is the limit on modified adjusted gross income (MAGI)?

$160,000 if married filing a joint return; $80,000 if single, head of household, or qualifying widow(er)

Where is the deduction taken?

As an adjustment to income on Form 1040 or Form 1040A.

For whom must the expenses be paid?

A student enrolled in an eligible educational institution who is either: • you, • your spouse, or • your dependent for whom you claim an exemption.

What tuition and fees are deductible?

Tuition and fees required for enrollment or attendance at an eligible post-secondary educational institution, but not including personal, living, or family expenses, such as room and board.


Qualified Tuition Program


Qualified Tuition Program – A program set up to allow you to either prepay, or contribute to an account established for paying, a student’s qualified education expenses at an eligible educational institution.

No tax is due on a distribution from a QTP unless the amount distributed is greater than the beneficiary’s adjusted qualified education expenses.

QTP’s include 529 plans, pre-paid tuition plans and ABLE plans.

A qualified tuition program is a program set up to allow you to either prepay, or contribute to an account established for paying, a student’s qualified education expenses at an eligible educational institution.

QTP’s can be established and maintained by states (or agencies or instrumentalities of a state) and eligible educational institutions. The program must meet certain requirements.

Your state government or the eligible educational institution in which you are interested can tell you whether or not they participate in a QTP.

How much can you contribute?

Contributions to a QTP on behalf of any beneficiary cannot be more than the amount necessary to provide for the qualified education expenses of the beneficiary.

There are no income restrictions on the individual contributors. You can contribute to both a QTP and a Coverdell ESA in the same year for the same designated beneficiary.


529 Plan QTP


This is a tax advantaged savings plan that invests in various sectors based on the age of beneficiary and varying risk factors.

The fund gets more conservative the closer the beneficiary gets to attending college.  Since 2018 funds can be used for primary and secondary education as well (up to $10,000 per year)


Pre-paid Tuition Plan QTP


This is a savings account for the pre-payment of education expenses at a participating higher educational institutions that offer tax advantages and protection against rising tuition rates.


Able Plan QTP


ABLE Accounts, which are tax-advantaged savings accounts for individuals with disabilities and their families, were created as a result of the passage of the Stephen Beck Jr., Achieving a Better Life Experience Act of 2014 or better known as the ABLE Act.

This is a savings account for individuals with disabilities and their families.

Distributions are tax free if used to pay the beneficiary’s qualified disability expenses, which may include education expenses.

If a designated beneficiary takes a distribution from an ABLE account for purposes of meeting qualified disability expenses, the distribution not exceeding those expenses is tax-free.

Any distribution in excess of qualified disability expenses is taxable as ordinary income and subject to a tax penalty equal to 10% of the amount of such distribution.

A “qualified disability expense” is any expense related to the designated beneficiary as a result of living a life with disabilities, and includes expenses for:

  • Education
  • Housing
  • Transportation
  • Employment training and support
  • Assistive technology

In 2014, legislation called the Achieving a Better Life Experience Act of 2014—better known as the ABLE Act—became law and has assisted many–including many clients of

The ABLE Act permits individuals with significant disabilities who are younger than age 26 at the time of onset of disability and who are receiving benefits under SSI and/or SSDI (Social Security Disability Income) to establish a tax-deferred ABLE account to provide tax-free distributions to meet the additional expenses associated with living with a disability.

Personal support services, healthcare, financial management and administrative services, and other expenses that help improve health, independence and/or quality of life are qualified expenses as well.

Cash contributions to an ABLE account may be made by the designated beneficiary “and” others.

The maximum amount of annual contribution to the account, in total, is generally limited to the annual gift tax exclusion amount ($14,000 in 2017; $15,000 in 2018).

TCJA (Tax Cut & Jobs Act legislation of 2017) changes to ABLE Accounts made three important changes to ABLE accounts:

  1. Additional annual contributions are permitted;
  2. A “designated beneficiary” is permitted to claim the saver’s credit for contributions made to the account; and
  3. Rollovers from 529 Tuition Savings Plans to ABLE accounts are permitted.

A designated beneficiary who meets the special rules related to the contribution limit may make an additional contribution, after the overall limitation on contributions is reached, in an amount not exceeding the lesser of:

The designated beneficiary’s compensation includable in gross income for the taxable year: or

The poverty line for a one-person household for the calendar year preceding the calendar year in which the taxable year begins.


The special rules applicable to the increased contribution limit apply to a designated beneficiary who is an employee with respect to whom no contribution is made for the taxable year:


  • To a defined contribution plan;
  • To a 403(b) Tax Sheltered Annuity plan; or
  • To a 457(b) deferred compensation plan.


 Saver’s Credit The retirement savings contribution credit—better known as the saver’s credit—is available to designated beneficiaries of ABLE accounts and to taxpayers who make a wide range of retirement plan contributions.

The saver’s credit is equal to the amount of contribution made to an ABLE account multiplied by the applicable percentage for the tax credit based on the adjusted gross income and filing status of the designated beneficiary.

The tax credit is a nonrefundable credit that is limited to the applicable percentage of the taxpayer’s eligible contribution; the credit cannot exceed $1,000 per taxpayer.

A nonrefundable tax credit is a tax credit that is limited by the individual’s tax liability and acts to reduce the amount of federal income tax payable.

If a taxpayer has no income tax liability, or has an income tax liability that is less than the tax credit, a nonrefundable tax credit will not result in a payment of any amount in excess of the taxpayer’s tax liability from the federal government.

The percentage of the contribution (not exceeding $2,000) available to the taxpayer as a tax credit, up to a $1,000 maximum tax credit, depends upon the individual’s adjusted gross income and income tax filing status.


Qualified Tuition Plans offer many tax benefits that can smooth out your retirement savings effort!


If you are financially able, be sure to consider plans in your state or where you and/or your children plan on attending college.


Key points:

Easy to set up

Offers tax advantages

Some such as the 529 can be used for primary, secondary and higher education expenses

Plan contributions and earnings can be rolled over to siblings or back to you if designated beneficiary does not use for education

Fees charged by administrators can eat away at earnings

Not all programs are created equally—research plan prior to setting up


Coverdell ESA (Education Savings Account)


Coverdell Education Savings Account – A trust or custodial account (normally a savings account) created or organized in the United States only for the purpose of paying the qualified education expenses of the designated beneficiary of the account.

If your modified adjusted gross income (MAGI) is less than $110,000 ($220,000 if filing a joint return), you may be able to establish a Coverdell ESA to finance the qualified education expenses of a designated beneficiary.

For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return.

There is no limit on the number of separate Coverdell ESAs that can be established for a designated beneficiary.

However, total contributions for the beneficiary in any year cannot be more than $2,000, “no matter how many accounts” have been established.

Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed.

If, for a year, distributions from an account are not more than a designated beneficiary’s qualified education expenses at an eligible educational institution, the beneficiary will not owe tax on the distributions.

Where can it be established?

It can be opened in the United States at any bank or other IRS approved entity that offers Coverdell ESAs.

Who can have a Coverdell ESA?

Any beneficiary who is under age 18 or is a special needs beneficiary.

Who can contribute to a Coverdell ESA?

Generally, any individual (including the beneficiary) whose modified adjusted gross income for the year is less than $110,000 ($220,000 in the case of a joint return).

Are distributions tax free?

Yes, if the distributions are not more than the beneficiary’s adjusted qualified education expenses for the year.


When the account is established, the designated beneficiary must be under age 18 or a special needs beneficiary.

To be treated as a Coverdell ESA, the account must be designated as a Coverdell ESA when it is created.


The document creating and governing the account must be in writing and must satisfy the following requirements.

  1. The trustee or custodian must be a bank or an entity approved by the IRS.
  2. The document must provide that the trustee or custodian can only accept a contribution that meets all of the following conditions. a) The contribution is in cash. b) The contribution is made before the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. c) The contribution would not result in total contributions for the year (not including rollover contributions) being more than $2,000.
  3. Money in the account cannot be invested in life insurance contracts.
  4. Money in the account cannot be combined with other property except in a common trust fund or common investment fund.
  5. The balance in the account generally must be distributed within 30 days after the earlier of the following events. a) The beneficiary reaches age 30, unless the beneficiary is a special needs beneficiary. b) The beneficiary’s death.


Qualified U.S. Savings Bonds


Qualified U.S. Savings Bonds – A series EE bond issued after 1989 or a series I bond issued in either your name or in the name of both you and your spouse (as co-owners).


You can use the proceeds tax-free to fund qualified educational expenses for you, your children or possibly other dependents claimed on your tax return.


You may be able to exclude interest from educational bonds when used for higher education–so always keep this option in mind if you now possess bonds or you anticipate doing so in your future..


Education savings bond program:


For 2018, the amount of your education savings bond interest exclusion is gradually reduced (phased out) if your MAGI is between $79,550 and $94,550 ($119,300 and $149,300 if you file a joint return).

You can’t exclude any of the interest if your MAGI is $94,550 or more ($149,300 or more if you file a joint return).




Traditional, ROTH, SIMPLE, SEP (simplified employee pension), SARSEP (salary reduction simplified employee pension)





  • No income limit for making a contribution.
  • Contributions deductible on your taxes if you meet AGI limits
  • $1.000 catch-up provision if over age 50
  • Because the deposits into a traditional IRA are tax deductible, premature withdrawals – subject to certain exceptions – are subject to penalty. Withdrawals before age 59½ may be subject to a 10% penalty
  • Withdrawals must begin after age 70½


  • Eligibility as long as you have compensation from employment up to age 70 1/2
  • Adjusted Gross Income limits apply to deduct any of these contributions.
  • Contribution cannot exceed maximum annual contribution limitation for tax year or your earned income if less than the maximum contribution limit
  • There is a mandatory withdrawal age for a Traditional IRA. This means that the money must be withdrawn starting at age 70.5 whether or not it is needed for living expenses or other purposes
  • A distribution from a Traditional IRA is taxed at ordinary income rates if one of the following conditions are met: age 59½, death, qualified first time home purchase–however a penalty would not apply





  • Earnings are tax free
  • No early distribution penalty
  • Minimum distributions generally do not apply
  • Eligible as long as you have compensation from employment
  • $1.000 catch-up provision if over age 50
  • Roth IRA contributions can always be withdrawn at any time without penalty.



  • No tax deduction on contributions
  • Strict eligibility requirements based on income
  • Tax bracket at retirement is key—there may be better alternatives depending on your income


The chief disadvantage of a Roth IRA is that you would not receive a tax deduction when the contribution is made.

As a result, a traditional IRA may be more advantageous than a Roth IRA for those who expect that their income bracket will be lower in the future (when distributions are made).

Every situation needs to be examined carefully to make an informed and optimal choice.

The exception to this general preference for the Roth over the traditional IRA would be when an individual investor anticipates that his or her income tax bracket will be lower later in life.

However, even with a lower tax bracket in retirement, the Roth IRA can still be a better choice unless a short investment period is anticipated.

Individuals with a traditional IRA who want to convert it to a Roth IRA can do so without regard to a modified adjusted gross income limit. Prior to year 2010, persons with an AGI of more than $100,000 were not eligible to convert their traditional IRAs into Roth IRAs.

Tax will be due on the money in the year of the conversion (remember, taxpayers receive a deduction for contributions made to a traditional IRA, and the IRS will want that money back).


For Roth earnings and Traditional IRAs, penalty-free withdrawals include but are not limited to: qualified higher education expenses; qualified first home purchase (lifetime limit of $10,000); certain major medical expenses; certain long-term unemployment expenses; disability; or substantially equal periodic payments.


Other Retirement Account Educational Funding Options:


Roth 401(k) Plans


As of 2006 – pursuant to the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) – a 401(k) plan may permit an employee to irrevocably designate some or all of his or her elective contributions under the plan as designated Roth contributions.

If a plan adopts this feature, employees can designate some or all of their elective contributions as designated Roth contributions, (which are included in gross income) rather than traditional, pre-tax elective contributions.

So, starting in 2006, elective contributions come in two types:

traditional, pre-tax elective contributions (elective contributions are also referred to as elective deferrals) and designated Roth contributions.  Designated Roth contributions are allowed in 401(k) plans and 403(b) plans but not in SARSEPs or SIMPLE IRA plans.

In order to make these contributions, the 401(k) or 403(b) plan must contain language that allows for these Roth contributions.

If the employer elects to offer designated Roth contributions, it must still offer traditional, pre-tax elective contributions.


Employers are not permitted to offer only designated Roth contributions!

Unlike Roth IRAs, there is no income cap on a person’s eligibility to participate in a Roth 401(k).


If an employer opts to provide this option and the employee is eligible to participate, his or her income is not a factor.


Why would someone elect to make designated Roth contributions to a 401(k) rather than stick with a traditional, pre-tax plan?

As we saw earlier with our look at a Roth IRA, the biggest benefit is that, at retirement, the plan participant is able to withdraw the money tax-free.

This means that if an individual can afford to make contributions to a Roth 401(k) while working, he or she will reap the rewards down the line when he or she has more money to play with in his or her retirement years.

The individual can still benefit from employer matching as well, although those contributions must go into a traditional 401(k) account (it is not the employee’s money, so he or she does not get to decide when to pay tax on it–as mandatory withdrawals must start at age 70 1/2).


Qualified Distributions from Designated Roth Account


A qualified distribution is generally a distribution that is made after a 5-taxable-year period of participation and that either:


  • Is made on or after the date the employee attains age 59½,
  • Is made after the employee’s death, or
  • Is attributable to the employee being disabled.


In the case of distribution to an alternate payee or beneficiary, the age, death or disability of the employee is used to determine whether the distribution is qualified.

The only exception is a rollover by an alternate payee or surviving spouse to a designated Roth account under a plan of his or her own employer, in which case it is such individual’s age, death or disability that is used.

A qualified distribution from a designated Roth account is not includible in the employee’s gross income.



Higher contribution than a regular ROTH IRA

Can get an employee match that would go into traditional 401k aacount

Tax-free growth



Your employer may not offer the plan

You can’t set up yourself


Simple IRA


A SIMPLE IRA Plan is an employer-sponsored plan under which an employer can make contributions to SIMPLE IRA’s established for its employees.

The term SIMPLE IRA means an IRA to which the only contributions that can be made are contributions under a SIMPLE IRA Plan or rollovers or transfers from another SIMPLE IRA.



Easy to set up



Contribution limits apply



A Simplified Employee Pension (SEP) is an employer-sponsored plan under which an employer can make contributions to IRAs established for its employees.

The term SEP IRA means an IRA that receives contributions made under a SEP.



The term SEP includes a salary reduction SEP (SARSEP).  This plan allows you, if self-employed to deduct 25% of earned income or up to 100% of salary up to $19,000 or $25,000 if you are age 50 or more and elect to contribute using the catch-up provisions.



Can be a great way to lower your business and/or overall taxes

When you pay taxes at time of distributions you may be in a lower tax bracket


Deadlines for set-up apply

When you pay taxes at time of distributions you may be in a higher tax bracket


Traditional 401K



Higher contribution limits than regular Traditional or ROTH IRA

Can get an employer match that would go into traditional 401k account

Contributions are deducted from your income resulting in a lower tax rate

Distributions may be tax free if certain conditions are met



Your employer may not offer this plan

You can’t set up yourself

Taxes are due upon withdrawal

Penalties and tax may be due unless certain qualified purposes are met


Other—403b, 457, Thrift Plans, etc. can be used for higher education but are normally best suited for retirement planning and improving or maintaining your living conditions during retirement.   Taxes and/or penalties may be due unless you meet the guidelines to avoid them such as age and other factors.


Credit Cards


The use of credit can be costly when used to fund your higher education.

However, credit can provide yet another way to fund higher education.

If you have a good to excellent credit score consider zero percent credit options and try to pay off loan within zero percent promotional period.



Provides a way to make your or a designated beneficiary(s) higher education dream occur

You can deduct the interest if used for qualified higher education expenses


Interest can be costly

Generally tax advantage is minimal


Current Income


Using your current income to fund educational expenses is a better option than having to borrow.


If you come up short in meeting your educational funding goal—consider this option if you have the discretionary income that is needed to pay educational expenses with your current income.



You won’t go into debt


If your income is needed for daily living and you don’t have a properly funded emergency fund this may be a bad option for you

Generally paid with after tax money so there is no tax advantage


Student Loan Cancellation & Repayment Assistance


Federal and private student loan debt discharged because or death or disability will not be taxed from 2018 through 2025.


Prior to this bill, the IRS treated the amount of forgiven loan as taxable.


But now, the new tax bill excludes student loan debt forgiveness from taxable income if you are permanently disabled.

It also excludes forgiveness in the event of death if there is a co-signer on the loan.

Generally, if you are responsible for making loan payments, and the loan is canceled (forgiven), you must include the amount that was forgiven in your gross income for tax purposes.


However, if you fulfill certain requirements, two types of student loan assistance may be tax free:


  • Student loan cancellation, and
  • Student loan repayment assistance

If your student loan is canceled or discharged, you may not have to include any amount in income.

Requirements for tax-free treatment of canceled or discharged student loans:

To qualify for tax-free treatment for the cancellation of your loan, your loan must have been made by a qualified lender to assist you in attending an eligible educational institution and contain a provision that all or part of the debt will be canceled if you work:

  • For a certain period of time,
  • In certain professions, and
  • For any of a broad class of employers.


Student Loan


If you are now giving serious consideration to education funding  and it appears that your saving target to meet all of your higher education fees may not be met—you can use student or parent loans to make up for the difference.

The primary reason for discussing educational funding topics at this time is to get you out in front of your higher education funding at the earliest point possible in your life stage so that you can avoid student loans and other types of unfavorable borrowing.



Provides funding for you and/or your child so that higher education can be attained

You may be able to deduct the interest on your tax return


Rising interest rates and borrowing can eat away at your wealth

You must generally have good to excellent credit to qualify


Qualified Tuition Reduction


Qualified Tuition Reduction – A “tax-free” reduction in tuition provided by an eligible educational institution, depending on whether it is for education below or at the graduate level.

It may not represent the payment for services.

If you are allowed to study tuition free or for a reduced rate of tuition, you may not have to pay tax on this benefit.

This is called a “tuition reduction” and you do not have to include a “qualified tuition reduction” in your income.

A tuition reduction is qualified only if you receive it from an eligible educational institution and use it at an eligible educational institution.

You do not have to use the tuition reduction at the eligible educational institution from which you received it.

In other words, if you work for an educational institution and the institution arranges for you to take courses at another educational institution without paying any tuition, you may not have to include the value of the free courses in your income.

The rules for determining if a tuition reduction is qualified, and therefore tax free, are different if the education provided is below the graduate level or is graduate education.

You must include in your income any tuition reduction you receive that is payment for your services.


Employer Provided Educational Assistance


To qualify as an educational assistance program, the plan must be written and must meet certain other requirements.

Your employer can tell you whether there is a qualified program where you work.

Tax-free educational assistance benefits include payments for tuition, fees and similar expenses, books, supplies, and equipment.

Education generally includes any form of instruction or training that improves or develops your capabilities.

The payments do not have to be for work-related courses or courses that are part of a degree program.


Business Deduction for Work Related Expenses


You can deduct the costs of qualifying work-related education as business expenses if self-employed or you file corporate tax returns.

This is education that meets at least one of the following two tests:

  1. The education is required by the law to keep your present salary, status, or job. The required education must serve a bona fide business purpose.
  2. The education maintains or improves skills needed in your present work. However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it:
  • Is needed to meet the minimum educational requirements of your present trade or business, or
  • Is part of a program of study that will qualify you for a new trade or business.

Once you have met the minimum educational requirements for your job, your employer or the law may require you to get more education.

This additional education is qualifying work-related education if all three of the following requirements are met:

  1. It is required for you to keep your present salary, status, or job,
  2. The requirement serves a bona fide business purpose of your employer, and
  3. The education is not part of a program that will qualify you for a new trade or business.

When you get more education than the law requires, the additional education can be qualifying work related education only if it maintains or improves skills required in your present work.


Student Loan Interest Deduction


Student Loan Interest – Interest you paid during the year on a qualified student loan, including both required and voluntary interest payments.


Although the interest deduction is not an educational funding vehicle it is important that you are aware that student loan interest that you pay can be deducted as an “above the line deduction” on your tax return, thus effectively reducing your taxable income.


If you find yourself in the unfortunate position of having to borrow for your or a loved ones higher education—you get somewhat of a benefit by at least being able to deduct student loan interest—at least for the 2018 tax year and possibly future years as well.




Isn’t it time you choose inner peace and joy within your mind and heart and not be in conflict or have to worry about education funding for yourself, your children or possibly other loved ones!


It is the desire of that this discussion has opened up your mind to new and possibly more effective ways that you can fund education costs for yourself, your children or possibly other loved ones that are dear to your heart.


By starting early and putting together a realistic plan you can fund education in a way that is relatively painful when you consider the possible alternatives (saddling yourself or your loved ones with mounting student loan debt) that you may be forced to take if you fail to plan properly at this time.


Always realize that there are many types of educational assistance that are tax free if they meet certain requirements and include the following among others:


Scholarships (Generally an amount paid or allowed to, or for the benefit of, a student at an educational institution to aid in the pursuit of studies at either an undergraduate or a graduate level), • Fellowship grants,Need-based education grants, such as a Pell Grant (need-based grants treated as scholarships for purposes of figuring their taxability. They are tax free to the extent used for qualified education expenses during the period for which a grant is awarded. Only the taxable amount must be reported), and • Qualified tuition reductions.


In addition, be aware that special rules apply to U.S. citizens and resident aliens who have received scholarships or fellowship grants for studying, teaching, or researching abroad.


Full scholarships whether academically achieved, musically achieved or athletically achieved can be a real winner for you and your family as your educational savings can be rolled over for other purposes and further help you build wealth if scholarships and other tax-free funding options are granted to the designated beneficiary.


Always realize that an American opportunity or lifetime learning credit (education credit) can be claimed in the same year the beneficiary takes a tax-free distribution from a QTP (such as a 529, prepaid tuition or ABLE account), as long as the same expenses are not used for both benefits.


This means that after the beneficiary reduces qualified education expenses by tax-free educational benefits, he or she must further reduce them by the expenses taken into account in determining the credit.


In closing, realize that this discussion is done with the understanding that the creator of is not engaged in rendering legal, accounting, or other professional advice and assumes no liability whatsoever in connection with the use of material on this site.


It is important that you realize that laws are constantly changing, and are subject to differing interpretations and further research on your part may be of benefit. suggests that you to do additional research and consult appropriate experts before relying on the information contained in this discussion.


All the best to your “Educational Saving” success…


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