NEW YORK (MainStreet) — Patrick Reilly, a 22-year-old hospitality and tourism management student at Niagara University, will graduate in May. But amid his bright future, he has to face $25,000 in student loans he's already accrued.
“I don’t think about it,” said the Red Hook, N.Y. resident. “Once I graduate I will get a really nice job, and $25,000 is not much debt.”
Reilly, who filed his tax return independently this year, lacks concern all the more, because he can benefit from certain tax breaks extended by Congress last year. The Tax Increase Prevention Act, for example, grants $4,000 for tuition and fees. Undergraduates can benefit by claiming the American Opportunity Credit, a partially refundable tax credit.
Homeowners facing foreclosure also have an available deduction.
“The Tax Increase Prevention Act extended the exclusion of up to $2 million in cancelled qualified principal residence mortgage debt from gross income for 2014 tax returns,” said Mark Jaeger, director of tax development with TaxACT. Normally, homeowners pay income tax on forgiven debt.
“The Tax Increase Prevention Act extended the itemized deduction for qualified mortgage insurance premiums, which is also known as private mortgage insurance,” Jaeger told MainStreet. “Any amount you paid in 2014 will appear in Box 4 of Form 1098 you received from your mortgage lender.”
Most states generally conform automatically to federal tax benefits or pass legislation annually to do so.
“Even though taxpayers in these dozen states may choose to wait and see if their state will recognize the federal tax benefits before they file their state return, there is no reason why they should delay filing their federal return and getting their federal refund,” said Kathy Pickering, executive director of The Tax Institute at H&R Block.
Those states include California, Georgia, Indiana, North Carolina Arizona, Hawaii, Idaho, Iowa, Ohio, Virginia, Wisconsin and West Virginia.
“You can either file a state extension and wait for the extender legislation to pass or file your return now without the benefit of the extender legislation then file an amended return later if the legislation passes,” said Jaeger. Eight of twelve states have introduced bills to update their conformity date. They include Arizona, Hawaii, Idaho, Iowa, Ohio, Virginia, Wisconsin and West Virginia.
“Because this does not impact the benefits taxpayers can claim on their federal return, they should get any federal refund they’re owed,” said Pickering.
--Written by Juliette Fairley for MainStreet