Transcripts

Kevin McCormally's Tax Tips-Hurricane Tax Tips

SUSIE GHARIB: In tonight`s tax tips, tax breaks for students impacted by last year`s hurricanes. Here`s Kevin McCormally, editorial director of "Kiplinger`s Personal Finance."

KEVIN MCCORMALLY, EDITORIAL DIR., "KIPLINGER`S PERSONAL FINANCE": Did you see the stories about college kids who had been driven from New Orleans by hurricane Katrina returning to Tulane, Loyola, Xavier and other campuses earlier this year? The damage was depressing, but it was a heartwarming moment in the rebirth of the big easy, and now those same students are bringing home super-sized tax breaks to their parents. You see, to encourage the revival of schools lashed by the wrath of Katrina, Congress doubled the value of the hope and lifetime learning tax credits for students at colleges affected by the storm.

That means the hope credit is worth up to $3,000 for each student in your family who attended a qualifying college in 2005. If your family qualifies for the lifetime learning credit for college or vocational school bills, that credit can knock $4,000 off your tax bill. Students at schools in what Congress calls the Gulf opportunity zone -- and that includes parts of Alabama and Mississippi, as well as Louisiana -- can cash in on the extra tax savings.

And note this: your student didn`t really have to return to New Orleans in order to win the bigger credit. If he or she attended a qualifying college last spring, for example, you still qualify. The key is that you paid tuition for a student at a qualifying college in 2005, even if he or she graduated before Katrina. Now the college credits do phase out at higher income levels. You don`t get them, for example, if your adjusted gross income is over $53,000, if you file an individual return, or over $107,000 if you and your spouse file a joint return. But if you have a collegiate connection to Katrina, be smart and check out the special rules. They can save you a lot of money. I`m Kevin McCormally.

GHARIB: If you have tax questions for Kevin McCormally, you can email him at the "tax tips" section of our web site on pbs.org.