Combining Education Tax Benefits?

If you are thinking of going back to school but dread the prospect of having no income for 2-5 years, I have at least two reasons to look forward to returning to the classroom.

  1. Previously MUYF has discussed the value of investing in qualified tuition plans to pay for further studies.  Also known as 529 plans, your contributions grow tax-free and can be used to pay for any college, university, vocational school, or other postsecondary educational institution.  The list of qualified education expenses under 529 is pretty broad and includes money used for books, room and board, and transportation.  But for the money you did use to pay for tuition or any required education expenses, you can also claim it back through the lifetime learning credit.  This is a pretty nice combo: your money grew tax-free and you get to claim it back as a dollar for dollar reduction on your total tax.
  2. If you had to take out a loan, you can still claim the lifetime learning credit for the amount of the loan that went towards tuition or any required education expenses.  This is not as good a deal as #1, but think of it this way: you are already getting a tax break and you haven’t even started repaying the loan yet.  And when it’s time to repay the loan, any interest you have paid are tax deductible.
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Paying for Education, One Purchase at a Time

If you have student loans to repay to Sallie Mae or are trying to save for education through a 529 Plan, you may want to use Upromise to help you out.  Upromise is a service that gives you cash for certain purchases from grocery stores, restaurants, online retail sites etc., which can then be transferred to your student loan account or 529 Plan – essentially a cash back program under which the cash is redeemed for education expenses.

To be honest, the cash back rates for Upromise are generally lower than most other programs such as ShopDiscover.  However, Upromise covers a much larger number of merchants and combines different programs to generate even more potential rewards.  Discover’s 5% cash back at Target.com and the Apple Store, for example, beats Upromise’s 2% and 1% rates at these online sites, respectively.  Upromise, however, offers 2% cash back on eBay and 1% on several travel sites, such as Orbitz and Travelocity, while Discover has not partnered with those sites as of yet.  Furthermore, Upromise also gives up to 8% cash back on restaurants that belong to the Rewards Network (for a full list visit rewardsnetwork.com) and on in-store purchases at a few places such as Bed Bath & Beyond (1%) and the Sunglass Hut (6%).

Upromise also allows you to add your grocery cards to your account, so that you get cash back on Upromise for certain items on top of your grocery stores’ discounts and/or points.  Participating stores include Safeway, Harris Teeter, and CVS.

Now the best feature of Upromise I think is that it allows you to add friends and family to your network.  That is, if they create a Upromise account and add you as a beneficiary, they can use the cash back program to help you pay for your education.  Alternatively, for online shopping, you can simply send them a “guest shopping” link, so that they do not even have to sign up for Upromisem but you can still earn cash on the program whenever anyone shops through that link.  So if your mom usually does the groceries and uses store cards, you may want to have her sign up for Upromise and help you pay off your loans; and if your grandparents are coming to visit, you might to want to send them your Upromise “guest shopping” link so that their trip can help you get some money into your 529 Plan.