Congress enacted the 529 savings tax exemptions back in 1996. The plans are named after section 529 of the IRS Code.Our November 2017 blog talked about the tax advantages of a college 529 savings plan. Originally designed as an incentive to save for college expenses, the plan provides both federal and state tax incentives.
"Can I deduct this on my taxes?" is a common question this time of year. Itemizing your deductions can be tricky and time consuming, especially when you have a lot of business-related expenses, but it can save you money in the long run if you do it correctly.
Reduce your tax bill with education deductions
The IRS defines "qualified education expenses" as "amounts paid for tuition, fees and other related expenses for an eligible student.
It's tax season again and you're facing the same question you face every year: should you file your taxes now or file an extension? A common misunderstanding about tax return extensions is that it will give you longer to pay what you owe - this is not true; filing an extension simply gives you more time to file, not more time to pay. You still need to estimate your taxes and pay them when you file your Form 4868; not paying or paying late will cost you in penalties and fees.
Our federal income tax system is a pay-as-you-go deal. The "pay" part is through the monthly voluntary withholding amount we authorize our employer to take out and pay for us.
But what if you are self-employed? You can't wait until the end of the year and pay everything at once. Besides, you will also have to pay an additional approximate 15% self-employment tax (half of which is deductible).