Soon, the swimming pools will close, vacations will come to an end and daylight hours will shorten. It happens every year. These harbingers signal summer is nearly over and school is right around the corner. The start of the school year can bring a wide range of emotions for students—from pure excitement to nail-biting anxiety. Parents and guardians can feel the emotions too, especially when it comes to affording the increasing cost of education.

Fortunately, federal and state income tax laws have created a number of savings plans, tax credits and tax deductions that make education more affordable—and paying for it less emotional. Because of the scope and complexity of today’s educational incentive landscape, this article will address the most popular opportunities and summarize their key features.

Savings Plans
Certain savings plans allow taxpayers to make contributions without being taxed on the earnings of or distributions from the account:

Federal Income Tax Credits
Two federal tax credits can often help taxpayers reduce the costs of higher education by reducing the federal income taxes they pay:

Federal Income Tax Deductions
Similarly, two federal tax deductions often help taxpayers reduce their federal taxable income by subtracting certain education expenses:

Illinois Income Tax Credit
For Illinois residents, a particular tax credit can help taxpayers reduce the costs of primary or secondary education by reducing the Illinois income taxes they pay:

Illinois Income Tax Subtraction
Likewise, a particular tax subtraction can help Illinois taxpayers reduce their Illinois taxable income by deducting certain education expenses:

While the aforementioned incentives do not comprise an exhaustive list, hopefully any anxious taxpayers will find some peace of mind in knowing a number of plans, credits and deductions exist to help make education more affordable. To better navigate the various options and take full advantage of them, consult with your professional tax advisor. iBi

Jesse Schroeder, CPA, CGMA, CFP® is a manager in Heinold Banwart, Ltd.’s Business Services Department. He may be reached at [email protected] or (309) 694-4251. For more information, visit hbcpas.com.