Question for the Money Doctors
Question submitted on Aug 11, 2012.
QuestionMy daughter lives in Oregon. She has been attending online classes with University of Phoenix for four years and is months away from getting her degree.
During these four years, her salary has been increasing dramatically. She now makes $72,000 and in the bottom of a brutal tax bracket. She brings home just a little more than I was bringing home making under $40,000 a year.
But yet, since she is making more, her over $40,000 in student loans are now only half subsidized.
Are there any tax incentives or saving accounts or anything to help students pay the student loans back? How would you suggest she handle salary, taxes and loan payments?
Congratulations for your daughter! Her best bets for the benefits derived for her successful application of her education in the work force would be to sit down and take time to plan. What she will find is that the more she makes, the more restrictive the tax law becomes for her in terms of deductions, and if her MAGI exceeds $75,000 if she is single, then there is no deduction for education interest expense. There is a good summary of her options at www.IRS.gov and key in Pub 970 in the search function. What she NEEDS to do is sit down and try to save as much as she can. Think about how much would be allocated to a Roth 401k which grows and distributes tax free, and a traditional 401k. There are many other options on her exciting journey. She should sign up on www.FeedThePig.org for tips and suggestions.
For additional information visit http://www.360financialliteracy.org/