General Flashcards

Question

Who can contribute to a Coverdell ESA?

Answer 1

Generally, any individual (including the beneficiary) whose modified adjusted gross income for the year is less than $110,000 ($220,000 in the case of a joint return).

Answer 2

Yes, if the distributions are not more than the beneficiary's adjusted qualified education expenses for the year.

Answer 3

$2000 per beneficiary, per year combined from all sources

Answer 4

529 account funds can be used for up to $10,000 of annual tuition costs associated with K-12 education The remainder of expenses must be covered from other funding sources (i.e., CESAs, savings accounts, scholarships, grants, loans)

Answer 5

Anyone can contribute to a UGMA or UTMA. They are taxable investment accounts with no contribution limits. Kiddie tax rules may apply to unearned income generated by the investments.

Answer 6

The standard deduction for an individual who can be claimed as a dependent on another person's tax return is generally limited to the LARGER of: $1,300, or The individual's earned income plus $450, but not more than the regular standard deduction for filing Single (generally $14,600 in 2024)

Answer 7

Special savings bonds through which an exclusion from taxation on interest is available when used for qualifying educational expenses.

Answer 8

The purchaser/owner must be at least 24 years old before the bond's issue date. The bond must be issued either in one parent’s name (as the sole owner) OR in the name of both parent and spouse (as co-owners).

Answer 9

When used for qualifying educational expenses and the owner’s MAGI is below certain limits, interest from bonds is tax-free.

Answer 10

Gross Income = Earned Income + Unearned Income Total Tax Due = ((unearned income - 1300) x 0.10) + ((unearned Income - 2600) x parent's margin tax rate) + (Gross Income - SD for Dependents x child's tax rate of 0.10)

Answer 11

If funds withdrawn before 59 1/2 for qualified educational expenses - taxed ordinary income, no 10% penalty; If funds withdrawn after 59 1/2, tax free (no penalty)

Answer 12

A Pell Grant is awarded to undergraduate students who have exceptional financial need and who have not earned a bachelor’s, graduate, or professional degree.

Answer 13

Schools have to participate in the program to provide the grant; each school participating in the program receives enough funds each year from the U.S. Department of Education to pay the Federal Pell Grant amounts for all its eligible students.

Answer 14

Distributions from student-owned Coverdell ESA account are counted as income. Roth IRA distributions are considered income on the FAFSA, as well.

Answer 15

Withdrawals from parent-owned or dependent student-owned 529 plans parent-owned or third-party owned Coverdell ESAs

Answer 16

include any expenses incurred at a time when the designated beneficiary is an eligible individual. The expenses must relate to blindness or disability, including expenses for maintaining or improving health, independence, or quality of life.

Answer 17

ARE NOT TAX DEDUCTIBLE (are limited to the annual gift tax exclusion amount ($18,000 for 2024) MUST BE IN cash or cash equivalents.

Answer 18

Earnings in an ABLE account are not taxed unless a distribution exceeds a designated beneficiary’s qualified disability expenses.

Answer 19

Rollovers may be made without penalty from a Section 529 tuition account to a Section 529A ABLE account if the beneficiary of the ABLE account is the designated beneficiary of the tuition account or is an eligible family member.

Answer 20

If the 529 ABLE Account is less than $100K, it is EXCLUDED from the EFC calculations

Answer 21

Cash, savings, checking accounts, money market funds, and CDs Investments (e.g., mutual funds, stocks, stock options, bonds, commodities) Rental real estate equity, businesses, investment farms, and trust funds College savings plans, CESAs and 529s

Answer 22

Cost of Attendance (COA) – EFC = Financial Need

Answer 23

Parents = (AGI) minus an allowance for taxes + living expenses. Students = Amount over ‘protected amount’ ($9,410 for 2024-25 academic year).

Answer 24

have an inverse relationship. With a higher EFC, there is less financial aid awarded. With a lower EFC, there is more financial aid awarded. *As the EFC increases, the available Financial Aid award decreases.*

Answer 25

* Cash, savings, checking accounts, money market funds, and CDs * Investments (e.g., mutual funds, stocks, stock options, bonds, commodities) * Rental real estate equity, businesses, investment farms, and trust funds * College savings plans, CESAs and 529s * Retirement assets and home equity * Accounts held/owned by Others (e.g., aunts or grandparents)

Answer 26

Accounts Held-by: * Parents or in dependent child’s name: Parent Assets * Independent students/spouses: Student Assets

Answer 27

* Student Income = 50% (OVER $9410) * Student Assets = 20%

Answer 28

* Parent Income = 22% - 47% * Parent Assets = 5.64%

Answer 29

“If others will contribute more… wait until years 3 & 4.” Distributions from accounts owned by relatives and others in Years 3 and 4 maximize the potential for Financial Aid. This is due to the two-year lookback on the FAFSA form for income. By waiting until Years 3 and 4 of the child’s college enrollment, the family will not have the distributions factored into their Financial Aid.

Answer 30

Based on financial need Don't have to be repaid

Answer 31

Generally, a scholarship is tax-free if you are a full- or part-time candidate for a degree at accredited post-secondary institutions.

Answer 32

Parent PLUS loan when made to a parent Grad PLUS loan when made to a graduate or professional student.

Answer 33

The U.S. Department of Education is the lender. Cannot have an adverse credit history. The maximum PLUS loan: (cost of attendance - any other financial aid received)

Answer 34

Direct Subsidized Loan as the interest is paid for by the U.S. Department of Education while the undergraduate student is attending college at least half-time

Answer 35

NON-REFUNDABLE - NO MONEY BACK LIFE time learning credit - 20% of qualified expenses upto $2K per TAX RETURN ROOM & BOARD does NOT count as qualified expenses You may have multiple people qualifying for LLC, but can only take ONE deduction of $2K per tax year

Answer 36

PARTIALLY REFUNDABLE = If the credit brings the amount of tax you owe to zero, you can have 40 percent of any remaining amount of the credit (up to $1,000) refunded to you. MAX Credit: $2500 PER qualifying person First $2K at 100%; Remaining at $25% of next $2K ROOM & BOARD does NOT count as qualified expenses

Answer 37

You can take same amount from 529 as the awarded scholarship each year