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Tax Cuts For Education

Posted On: 2005-12-20
Length: 30:32

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Good Tuesday it is December 20, 2005. This is the Financial Aid Podcast episode #141 and name is Chris Penn and welcoming you to yet another episode of the financial aid podcast. We're going to talk a lot about the budgetary in Congress that's 2005 Pig Book, our new press release, a $20,000.00 per year scholarship and some news that you could use and a male that combined together for tax breaks, tax cuts for education and of course some Podsafe music. So let's get started right away with the news.

Topping the news today, a reaction from yesterday's Congressional Budget Reconciliation passage in the house; a lot of people are reacting and the education community, appropriately so; that the education bill has been passed is really pretty awful for students, pretty awful for families and not that much of an impact on the budget. The budget savings from this Reconciliation Act is supposedly going to go toward deficit reduction, reduction of the Federal Budget Deficit which is currently at $427 billion per year, that's $ 2.1 trillion over five years. The supposed savings from the Department of Education cuts work out to about $13 billion in higher education, a total of $40 billion from the bill over a period of five years, or about $ 8 billion a year. When you work out the math on that it works out to 0.374% of the total budget deficit. Increasing loan interest rates, increasing consolidation loan interest rates increasing for parents to takeout loans, all that works out to, literally if the total budget deficit was a $1 bill the amount this bill would do towards reducing would be taking a penny of that dollar bill cutting it into thirds and then throwing away 1/3 of that penny. When you look at it, its an insignificant amount money compared to the entire budget deficit as a whole yet it does increase the cost of education towards, especially towards people who need the assistance the most; the lower and middle class families who are trying to send their kids through college. As a result a lot of student groups and a lot of college university groups have asked parents, students, families and financial aid professionals and really any one involved in higher education to call their representatives in the Senate who have not voted on this bill yet and let them know that they need to pass a "No" vote on the Budget Reconciliation Bill. You can reach your Senators by going to www.senate.gov. Incidentally as a matter of perspective, if you think about the amount of pork in the federal budget, the amount of it is pretty amazing at some of the things that get passed in the bill. According to the Citizens against Government Waste website, 6.4% of the total budget deficit is identified as Pork. We have things like $450,000 per year for the Baseball Hall of Fame, $97,000 for the Franklin American Heritage Center, in Lewiston Maine, $350,000 towards the Rock and Roll Hall of Fame Museum in Cleveland Ohio, $150,000 per year towards the Therapeutic Horseback Riding Program at Lady B Ranch in California. The Kitchen Relocation Museum in Fairbanks Alaska $2 million for that one. $6.285 million for a study on Wood Utilization Research in several states. Talk about literal crap, $268,000 towards Livestock Waste Research in Iowa.

All of these even though it is fairly amusing some of these projects, they all do add up. Basically with the definition with Pork, at least according to the Citizen against Government Waste, it's basically a series of seven criteria. It's requested by only one Chamber of Congress, it's not specifically authorized or competitively awarded, it's not requested by the President it greatly exceeds the President's budget request of the previous year's funding. It's not the subject to Congressional Hearings and serves only a local or special interests. Now a lot of the projects that are in the Pig Book which is the book that the Citizens against Government Waste publish, they're good projects on a local level. That is to say if local state taxes were to pay for them it would be completely appropriate for them to be in a budget. For example, Ted Stevens from Alaska who you may know from "The Bridge to Nowhere" fame also has $26 million in other requests for things including things like $1.7 million for Research into Berries. I presume they're Alaskan Berries I guess. $1.1 million for Alternative Salmon Products. $284,000 for Ethno-botany Research, $167,000 for Salmon Quality Standards, and more excrement and all $160,000 a year for Seafood Waste Research in Fairbanks. Again if these were all projects that were being sponsored and funded by Alaska state tax payers that would be fine, but they really don't place in the Federal budget. The Pig Book identified almost 14,000 projects that $27 billion a year. That is more than double what Congress is proposing in cutting out of higher education, so by simply scaling back those projects in the Pig Book, we will be able to recoup the entire cost of the higher education cuts in education plus pick up additional $ 13 or !4 billion in savings. Definitely let your Congressional Representatives know that's probably where they should start to look when it come to deficit reduction. Are things like tax cuts for the wealthy to blame? Not as much as stupid projects. Let your Senators know when you call them that the Pig Book would be good place to start cutting the budget. Also check out our press release on alternative student loans you'll see it on Yahoo news, on Google news, and variety of other resources from PR web. We are basically letting people know about alternative to student loan options for the spring. All right, let's kick off today's show with a bit of Podsafe music Charlie Crowe with a new song called "007."

(music)

"007" by Charlie Crowe from the Podsafe Music Network at www.music.podshow.com that's where all of Charlie's music could easily be used for intro music for the show; may have to switch out the music from time to time at the beginning of the show just because he's got so much good stuff on the Podsafe Music Network. Kudo's to you Charlie. Today's scholarship update the National Institutes of Health Undergraduate Scholarship Program. This is a pretty big one, it's well worth your applying for certainly. This is a $20,000 a year scholarship plus paid research training at the National Institute of Health during the summer and paid employment and training at the National Institute of Health after graduation. The UGSP, the Undergraduate Scholarship Program offers competitive scholarships for students from disadvantaged backgrounds who are committed to careers in Bio-Medical, Behavioral and Social Science Health Related Research. It includes a 10 week summer laboratory exercise and experience and a one year of full time employment after graduation for each year of the scholarship is a $20,000 per year in tuition, educational expenses and reasonable living expenses to scholarship recipients. Scholarships awarded for one year can be renewed for up to four years. Eligibility requirements, you must be a U.S. citizen international or qualified non-citizen. The qualifications are pretty strict but it basically works out to permanent residents and people from protectorates of the United States like the Federated States of Micronesia, Guam. Enrolled or accepted in enrollment as a full time student for the 2006, 2007 academic year at a four year undergraduate institution. From a disadvantage background this is a definition your financial aid office designates, you are someone who has exceptional financial need and you must have a 3.5 GPA or higher on a 4.0 scale or be within the top 5% of your class.

In addition to that, there's a strong applicants are able to demonstrate their commitment to a research career. Applicants are most able to demonstrate this commitment if they've already participated in laboratory research, been in involved in extra-curricular science activities or taken advanced courses related to their field. There are 15 total scholarships that are available and that makes for this, what is it, $300,000 in scholarships, that's quite a bit. That's today's scholarship update. You can find more information about it at our websites www.studentscholarshipsearch.com it's our free scholarship search which now offers $41,763,850.00 in scholarships. By the way, I was tallying up just what the value of the total value of all the awards on a day to day basis are and it came out to ... million and change, so that's not bad especially for a site that's only been around for a little while, you know we basically founded it as part of the Financial Aid Podcast, just so I had a place to put my scholarship listing on a day to day basis, and it's up to $41 million already. When you see a lot of scholarships on sites advertising they have X number of million dollars in scholarships and X number of billion dollars in scholarships they might be worth a little bit of perspective to think about that. We've all been together on this podcast putting the scholarship database together, and really a now it's not been up that long and we've got $41 million of aid in that, so that's pretty quick, that's a pretty fast accumulating database. I imagine that it will be too long before we hit a billion dollars and that we can just keep going from there. Well worth thinking about when you see advertisements for other scholarship search services that say they have X a number of billion of dollars, we're getting there were halfway to our first - what was that 5% words the first billion - will get there. Let's do another piece of Podsafe music; we're going to do Amy Fox, "Keeping Time with The Moon."

(music)

"Keeping Time with the Moon" by Amy Fox from the Podsafe Music Network. All right with touch on the mail bag and the news you can use at the same time. Reagan Lynch writes in to say, " hi Chris, I enjoy your pod cast as I'm a student in my senior year planning for grad school the fall. I got the following message from a bank or I keep my savings and loans and thought you might want to pass on the tuition tip to your listeners other financial tips are also provided. His bank of course is ING Direct, the Internet bank. And one of the tips that they offer is that college tuition tax deductions may not be possible next year. In other words you can pay next masters bill before December 31 and claimed that on this year's taxes up to $4,000. I did a little bit more research on this, and there are a few more caveats but here are the details, the $4,000 deduction is for 2004 and 2005, you can deduct up to $4,000 of college tuition or fees paid by you, your spouse, or any person claimed as a dependent on your return. So if you're an independent student you can claim it for yourself otherwise your parents can claim this for you. This is what's called the "above the line deduction" Which means you don't have to itemize nor to take advantage of it. However, the $4,000 figure is the annual maximum regardless of how many students are being claimed four on one parents return. There are a few ground rules with this. You don't get the full deduction if you run married with a modified AGI, witch is adjusted gross income above 65,000 or if your filing jointly with a spouse if you have an AG I above 130,000. If you have an AGI between 65,000 and 80,000 for single or 130 and 160 for joint filers, you get a reduced deduction of up to $2,000. You are ineligible if you were married and file separately from your spouse. No deduction is allowed on tax returns on anyone who can be claimed as a dependent on someone else's returns. So if you're the student, and you're an dependent student, you cannot claim this. If you're an independent student you can. No deduction can be claimed for expenses I paid for with earnings from a section 529 plan or from a Coverdell Education Savings Account pitch will touch on in just a second. Also you can claim a deduction in the same year that you claimed a Hope Scholarship PRI and lifetime learning tax credit for the same student, will touch on those in just a second as well.

Another to do your taxes is a Coverdell Education Savings Account. You can contribute up to $2,000 per year for which makes the Coverdell Account a nice way to save for college. For this is true few have a few children, since you can contribute up to $2,000 annually to separate accounts at every each child. Annual contributions are allowed up until the account beneficiary turns 18 at which time you have to start drawing it down. There are some limits, if you are unmarried your contributions limit is phased out between an adjusted gross income 95,000 and 110,000; for joint filers between 190 and 220. If the nice thing about the Coverdell savings accounts is that the earnings buildup tax free. The money can be withdrawn people so tax free to pay for college expenses. I like contributions to Roth IRAs; Coverdell contributions are non deductible but the tax free withdrawal privilege makes up for that. You can also take text free Coverdell accounts payouts to cover the column entry and secondary school costs pick fewer sending your child to a private school, eligible expenses for the tuitions and fees to private and religious schools. You have until April 15 at the following year to make your contributions for the tax year in question, so for 2005 the latest that you can make a contribution would be April 15 2006. Here's one for companies-if a company pays you to take classes, if your employer agrees to reimburse you for a class you take, up to $5,250 of that income is tax free. Even graduate level courses qualify for employer reimbursements. This break is only available for costs incurred by you as a student is not for the company. Outlays for your kids and spouse are ineligible. However, there is no income rule pin this like there is for the previous rules. 529 plans, I think I'm had to go to hold off talking about because they are a mammoth, gigantic topic. $2,500 of annual college student loan interest charges can be taken as a tax break. This is for the "above the line" adjusted gross income deduction. Student loan interest is deductible from your adjusted gross income which does make a difference.

The catch on that one there is an income limit on this, for unmarried tax payers, between $55,000 and $65,000 is your adjusted gross income, the benefit phases out then; for joint filers, its between $105,000 and $135,000 and then the Hope Scholarship Lifetime Loan and Tax Credits also fairly detailed, we just did an article on this at www.studentloanconsolidator.com under the tax cuts for education. Definitely check out that article, it's a little longer but it's worth reading. One important thing is that you could file for a retro-actively for your taxes up to three years after the tax year has passed. If you have not taken these deductions in the past, and you are eligible for them you can file a corrected application, a corrected return with IRS, and get some additional money back if you qualify for it. Definitely worth doing, I would suggest using a Tax Preparation Specialist of some kind for it, because it can get pretty hairy and ideally find one who will indemnify you against an audit. If they file some retro-active corrections to your taxes, and they get you a whole chunk of money back, and later on it turns out that things didn't work out as well, they will eat the audit costs as oppose to you having to do that. That is something that is very nice, I know the tax preparer that I'm using and yes we don't get paid for this but I use H&R Block and for $27 additional fees, they basically say they will show up in court for you and pay any differential in taxes that you owe up to $5,000. That's pretty good insurance. That covers Reagan's mail bag and provides a little news you can use, definitely check out those tax deductions, we'll put a link to the student loan consolidator in the show notes and I'll probably beef up the tax cut section with a couple of these other benefit programs as well because they're well worth reading about. Let's finish off today's show with one more piece of Podsafe music; we're going to go back with some Christmas music and do the other Crowe we like to feature, Alison Crowe with "O Holy Night."

(music)

Terrific and inspiring music from Alison Crowe, "O Holy Night" from the Podsafe Music Network. And that is going to do it for today's show as a reminder, tomorrow will be the last regularly scheduled Financial Aid Podcast until next Wednesday; I'll be on the Christmas Holiday for the next few days. Thursday, Friday, Monday and Tuesday's shows will be all new music shows. We're pre-record them and just put them out and have a little scripts that will update the feed on a daily basis, so you'll be able to catch a whole bunch of new Podsafe music. I'm almost certainly going to do a Christmas show which will of course have Christmas music in it; it would be kind of silly to have a Christmas show that didn't. The rest of the time we'll try to steer clear of too much Christmas music just so that you don't get over loaded with it. Definitely check out the Podsafe Music Network if you are a podcaster. There's so much good Christmas music, music of all kinds is popping out everywhere that it is well worth a good listen. Take advantage of it, it's out there for a free resource, free for listeners and even more free for podcasters to download the music and give it a listen. Show notes will be at www.financialaidpodcast.com stop by there, you'll also find directions there for subscribing to the podcast if you're not subscribed. Definitely recommend that you subscribe so that you get a new fresh issue every week day. I try to make sure that there is a show even if I am out sick, even if I have to have a machine read it. Feed back at www.financialaidpodcast@gmail.com because I'll be away for the holiday, if you have feed back that is for after Wednesday show after tomorrow's show I won't be able to get to it until the following Wednesday; you may want to hold off on it or you may want to take some time doing it as an audio comment and then we can include that in the following Wednesday show which I'm sure will be a busy one because there will be quite a bit of news to cover. Let's see, I think that's about all so until tomorrow stay tuned, stay subscribed and we'll see you then, take care.

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Also you can claim a deduction in the same year that you claimed a Hope Scholarship PRI and lifetime learning tax credit for the same student, will touch on those in just a second as well.

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