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Hello,
I am posting here- because
A) I've googled until my eyes felt like they were going to fall out of my head- and can't find my answers.
B) I posted on the Foolish questions- and the only response I got was to try posting here.

So perhaps one of my fellow Fools- with much more tax experience than I, can help:

I am pursuing a second bachelor's degree (part time-8.5 credits per semester) while working full time. I understand that there are tax breaks of some sort for me becuase I am going back to school- but I don't understand the limitations.
My income is just under $45,000( for 2005 tax year) and next year will be just under $55,000. Does this make me ineligible for the $2000 tax credit/deduction (I'm not sure which it is) for students?

I have additionally taken out a federally subsidized loan in the amount of $1,200 per semester. Are there additional tax breaks for having a school loan?

I am trying to budget myself to save to get ready to stop working and go to school full time in 2 years. I have claimed 1 exemption on my current income- but am trying to figure out if I can claim 2 exemptions to save more $ but not have to pay back a lot to the govn't at the end of the year. (I have always claimed 0 before- but realized that I was getting a lot back from the government- so I should just invest the extra I would have gotten back and not have the government hold it for a year)
I'm really young (single + no kids) and have never done my taxes before (I've only ever taken them to H&R Block before- but they haven't been so patient with my questions- so I'm planning on trying to do them myself this year) I also found out that my raise bumped me into the next tax bracket- according to my office accountant- so is it really unwise to claim 2 exemptions on my W2?

Even if you don't have answers to my question- if you can point me to a website or anything that might help- I would greatly appreciate it. As the IIRS website didn't expalin anything clearly enough for me to understand what exactly I qualify for and what I don't.
Thank You:)
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Welcome to the Fool. You wrote:

I am pursuing a second bachelor's degree (part time-8.5 credits per semester) while working full time. I understand that there are tax breaks of some sort for me becuase I am going back to school- but I don't understand the limitations.

My income is just under $45,000( for 2005 tax year) and next year will be just under $55,000. Does this make me ineligible for the $2000 tax credit/deduction (I'm not sure which it is) for students?


Actually you choose between the Lifetime Learning Crdit and the tuition deduction. It's called simplification. You'll be well within the AGI limits for the deduction through 2006. You're below the AGI limit for the credit for 2004, but may be in the phaseout range for 2005, depending on what may reduce your gross income, e.g., 401(k) contributions.

Explanations of both the credit and the deduction, including income limits, are in IRS Publication 970: http://www.irs.gov/pub/irs-pdf/p970.pdf

I have additionally taken out a federally subsidized loan in the amount of $1,200 per semester. Are there additional tax breaks for having a school loan?

Not until you pay it back, when there's an adjustment to income for student loan interest paid. (See Pub 970.) As noted in the Pub, paying qualifying expenses with loan funds is the same as paying them with your own money.

I am trying to budget myself to save to get ready to stop working and go to school full time in 2 years. I have claimed 1 exemption on my current income- but am trying to figure out if I can claim 2 exemptions to save more $ but not have to pay back a lot to the govn't at the end of the year. (I have always claimed 0 before- but realized that I was getting a lot back from the government- so I should just invest the extra I would have gotten back and not have the government hold it for a year)

I'm really young (single + no kids) and have never done my taxes before (I've only ever taken them to H&R Block before- but they haven't been so patient with my questions- so I'm planning on trying to do them myself this year) I also found out that my raise bumped me into the next tax bracket- according to my office accountant- so is it really unwise to claim 2 exemptions on my W2?


The recommended number of withholding allowances for a single person with one job is 2. Don't worry about the raise and the brackets--the withholding tables take all that into account. You can also take into account any education tax break you'll be getting. The worksheet on the W-4 (available from your employer) will walk you through it to see if you can claim more.

You may want to get software to help you do your return since you'll need to check whether the credit or deduction is best for you. Unfortunately, as of last year the only way to do this was to plug the numbers into your return (including the state) and see what the bottom line is. There are free personal-use software programs, e.g. www.taxact.com.

Holler back after you do your homework (may as well get in practice) if you need clarifications.

Phil
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Hi,

In the FAQ's hot link to the right of this page, you will find a link to and article called "Uncle Sams education something or other" That may help you with your questions.

On the IRS Web site the FAQ has a list of resources and Pubs that may help. http://www.irs.gov/faqs/faq3-2.html

Good Luck.

Pat
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