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Please consult your tax advisor, as the tip here is not meant to replace that but serves to provide a basis for a closer look at tax saving strategies.
This tax tip will benefit those pre-meds who have an income generating occupation and are interested in saving $$$. Nontrads will probably benefit the most from this tip.
1. Put away as much as your can in a retirement savings account (Simple IRA, 401k, etc) while you're still working. Obviously, this reduces your taxable income at this stage.
2. The year after you matriculate take an early distribution from your retirement savings plan. Typically the income you'll report is zip (or a nominal amount). So the distribution saves you the approx. 25%-35% in income tax. Additionally, the early distribution penalty of 10% is voided because the expenses are for higher education. You can count tuition, fees, books, equipment, and also room & board (since you're atleast half time student).
If you add up the percentages you could save almost 45% on the distribution.
Note - If you're using a 401k, roll it over into a IRA (not a ROTH IRA). If you're interested to learn more look at Pub 590.
Hope this helps someone.
-Y Marker
This tax tip will benefit those pre-meds who have an income generating occupation and are interested in saving $$$. Nontrads will probably benefit the most from this tip.
1. Put away as much as your can in a retirement savings account (Simple IRA, 401k, etc) while you're still working. Obviously, this reduces your taxable income at this stage.
2. The year after you matriculate take an early distribution from your retirement savings plan. Typically the income you'll report is zip (or a nominal amount). So the distribution saves you the approx. 25%-35% in income tax. Additionally, the early distribution penalty of 10% is voided because the expenses are for higher education. You can count tuition, fees, books, equipment, and also room & board (since you're atleast half time student).
If you add up the percentages you could save almost 45% on the distribution.
Note - If you're using a 401k, roll it over into a IRA (not a ROTH IRA). If you're interested to learn more look at Pub 590.
Hope this helps someone.
-Y Marker
