Jeopardy -CPCU 556 (week 7)

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CPCU 556 Recollection and Recognition Reinforcement Training. Educational Funding

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  • Expenses That Do Not QualifyQualified education expenses do not include amounts paid for: Insurance,Medical expenses (including student health fees),Room and board,Transportation, or Similar personal, living, or family expenses.This is true even if the amount must be paid to the institution as a condition of enrollment or attendance.
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  • Jeopardy -CPCU 556 (week 7)

    1. 1. Donna M. Kesot, CPCU, Copyright 2012 . All Rights Reserved, 5-2-2012
    2. 2. Education Tax Credits Tax Miscellaneous Treatment 100 100 100 100 200 200 200 200 300 300 300 300 400 400 400 400
    3. 3.  Name 5 Factors affecting Cost of Education
    4. 4. What is1. Type of program (undergrad, grad., etc.)2. Type of institution (public, private, community college, ivy league, etc.)3. Years involved4. Residency of student5. Employment status of student6. Scholarships & financial aid7. Room, Board, including utilities if off campus8. Transportation9. Incidental Expenses like: Entertainment expense, Clothing, Other Personal Services Home
    5. 5.  Two Major Educational Tax Breaks
    6. 6. What are Hope Scholarship Credit › 1st Two Year of college › 100% 1st $1000, 50% next $1000 in qualified fees/tuition › Reduced by scholarship/fellowships exempt from tax Lifetime Learning Credit › 20% of up to $10,000 annuall Home
    7. 7.  7 Federal Exclusions from Income, Gift, or Penalty Taxes
    8. 8. What are Daily1. Earning from qualified tuition programs Double2. Earnings from education savings 600 points accounts3. Interest of certain U.S. Savings Bonds4. Amounts up to $5,250 per employee5. Amounts of scholarship & fellowship grants to degree candidates used for books, equipment, fees & supplies6. Distributions of regular IRAs before age 59 ½ for eligible education expenses are not subject to 10% penalty7. Unlimited gift tax exclusion for tuition directly to education organization Home
    9. 9.  Two Federal Income Tax Deductions
    10. 10. What are:1. Student Loan Interest Deduction 1. Interest paid on qualified student loans 2. $2,500 maximum 3. Phases out with adjusted gross income of $50,000 (single) and ($100,000 married filing jointly), and completely phased out at AGI $130,000.2. Deduction for Higher Education Expenses Home
    11. 11.  American Tax Opportunity Credit
    12. 12. What is the American opportunity credit? For2012, you may be able to claim an Americanopportunity credit of up to $2,500 for qualifiededucation expenses paid for each eligiblestudent. 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. Up to 4 years Home AGI max: $180,000 if married filling jointly; $90,000 if single, head of household, or qualifying widow(er)
    13. 13.  Hope Credit
    14. 14.  For a taxpayer to claim the Hope Credit, the student for whom you pay tuition and related expenses must be an eligible student. To be an eligible student, generally, the student must: Not have had expenses that were used to figure a Hope Credit in any 2 earlier tax years. Not have completed the first 2 years of postsecondary education (generally, the freshman and sophomore years of college) before this tax year. Must have been enrolled at least half-time in a program that leads to a degree, certificate, or other recognized educational credential for at least one academic period beginning in the tax year. Must have been free of any federal or state felony conviction for possessing or distributing a controlled substance as of the end of the tax year.Daily Double 400 points Home
    15. 15. Lifetime Learning Education Credits
    16. 16. What is for 2011/2012, you may be able toclaim a lifetime learning credit of up to$2,000 for qualified education expensespaid for all eligible students? There is no limit on the number of years the lifetime learning credit can be claimed for each student. The lifetime learning credit is a nonrefundable credit. This means that it can reduce your tax to zero, Home but if the credit is more than your tax the excess will not be refunded to you.
    17. 17.  This happens when a student with a 529 decides to go out of state for college
    18. 18. What is there is no locking in of tuition? Home
    19. 19.  Earnings from the assets in a Qualified Tax Plan (QTP)
    20. 20. What is Not Taxable?QTPs will also not be taxed on distribution ifthey are used to pay for qualified highereducation expenses, i.e., qualifieddistribution Home
    21. 21.  529 Plans Definition
    22. 22.  What are state programs that may be 529 savings accounts (or 529 saving account programs =prepaid tuition trusts) Aka Qualified Tuition Program (QTP) Purchase credits or certificates for a designated beneficiary for tuition and fees for a given number of academic periods or course units at the current tuition rates Home
    23. 23.  529 Contributions Tax Treatment
    24. 24. What are: Not deductible for federal tax but considered completed gifts from account owner to designated beneficiary, i.e. no federal gift tax no GST › Can be front loaded for 5 years ($11,000 annual exclusion) May be deductible for state income tax for residents of the state up to the state allowed limit? Home Daily Double = 600 points
    25. 25.  Grants
    26. 26.  What are financial aid that does not need to be repaid? Based on demonstrated need according to FAFSA & EFC calculation Pell Grants are designed for low and middle income › Have not yet achieved Home bachelor/professional degree
    27. 27.  Expected Financial Contribution
    28. 28. What is EFC, a measure of a family’sfinancial strength determined in the FAFSA(Free Application for Federal Student Aid?EFC = Expected Parent Contribution +Expected Student ContributionA financial index derived from the income,assets, and other household informationreported on the FAFSA used to determine a Homestudent’s level of eligibility to receive federal,state, and institutional financial aid
    29. 29.  Coverdell Educational Savings Account
    30. 30. What is a custodial savings account calledan Education Individual RetirementAccount (IRA) whose earnings grow tax-free on behalf of a minor beneficiary ifused to pay for primary, secondary, or postsecondary education expenses? Home
    31. 31.  Asset reducing strategies
    32. 32. What are:Spend liquid assets & savingsPay for college with student assets firstSell assets with capital gains before FAFSAMake major cash purchases nowPay off loans and credit debgt with cash assetsMinimize savings levelsIncrease funding to annuitiesPay down mortgage on primary residence Home
    33. 33.  Series EE and Series I Savings Bonds
    34. 34. What are Series EE--A US savings bond sold in demoninations of $50 to $10,000, with the purchase price being 50% of the face amount (e.g. issued at a discount & redeemable at face value at maturity) Series I—A nonnegotiable US Treasury obligation that pays investors a composite fixed rate plus an inflation-based rate of return that is adjusted annually and is issued at face value Home

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