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According to a survey conducted by Transamerica Center for Retirement Studies, less than 12% of Americans are aware of what is called The Savers Credit — a way to save up to $1,000 on their income tax. Yes, believe it or not, the government will credit low- and moderate-income taxpayers who save for their retirement. So if you currently do not have a retirement savings plan in place, this information might encourage you to do so. This is how it works in California.

Qualifying Accounts
To qualify for the Savers Credit, you must make regular contributions to an employer sponsored 401k, 403(b), 457 plan, a Simple IRA, a SEP IRA, a traditional IRA, or a Roth IRA. Keep in mind that while you can claim your contributions to these accounts, you may not claim any contributions made by your employer.

How to Be Eligible

Eligibility for the Savers Credit requires the following three things:

In 2012, the maximum adjusted gross income to qualify for the Savers Credit is $57,500 for a married couple filing jointly, $32,125 for a head of household, and $28,750 for others. The maximum credit you can claim diminishes as your income increases.
The filer must be 18 years of age or older by the end of the filing year, not a full-time student during the year taking the credit, and not claimed as a dependent on another person’s return.
The contributions made to your retirement account must have been made during the tax year for which you are filing.
How Much You Can Save
Of course, before you put the ball in motion, you will want to know how much you can actually save by claiming the Savers Credit. Depending on your income and filing status, you can claim the credit for 50, 20, or 10 percent of the first $2,000 you contribute to a retirement account in that tax year. That makes the maximum credit amounts $1,000, $400, or $200.

A married couple, filing jointly, can claim $2,000. However, if you took a taxable distribution from your account any time during the two years prior to filing your return, that distribution reduces the credit you can claim. Also, the Savers Credit is a credit, not a refund. Claiming it can reduce the tax you owe to zero, but you will not get a refund from it.

How to Claim the Credit
To claim the Savers Credit, you must file a form 1040A, 1040 or 1040NR. You cannot take this claim if you file a 1040EZ. You must also attach Form 8880, “Credit for Qualified Retirement Savings Contributions.”

If you use an online tax preparer like TurboTax (find out how to file your state income tax for free), and you answer all the applicable questions, they automatically apply any credits for which you qualify. However, if you do your own taxes, or pay a human tax preparer, you may want to ask about the credit. Remember, if you are not currently enrolled in a retirement savings plan through your employer then you will want to enroll now to be able to claim the credit for 2013.

Also, according to the IRS website, “many of the pension plan limitations will change for 2013 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment.” But don’t let that stop you from checking into it. Any amount of a tax credit is better than no credit at all.…

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The holidays are nearly over and a new year is approaching. Whether you are resolving to earn and save more money, trying to cover some of the holiday debt you incurred or simply trying to get a job, there are a few part time options out there that are particularly well-suited to a college schedule and pay a decent hourly rate, to boot.

Waiting Tables

Table service in a restaurant can pay amazingly well. You’ll typically earn a base hourly rate — in many states, it is mandated by law and often the equivalent to minimum wage — and the rest is all about the tips. Tips, of course, are dependent upon a number of factors including your charm and ability to hustle quickly from table table. On the other hand, some factors that affect tips are out of your control. The number of servers on staff during a shift, the number of customers that come in at the time you work on the days you work, and the overall popularity of the restaurant. You will often have to work your way into better shifts, but the better-paying times (evenings and weekends, typically) have the added benefit of not interfering with a standard full time class schedule.

It’s important to do a little research before you apply for and accept a serving job. Make sure that the restaurant has a decent amount of business. If not, there are much more rewarding things that you can do for minimum wage (or less!). Ask what shifts the place is hiring for. You’d hate to end up in a position where your making excuses to your new boss or a professor for absences due to work/school conflicts. Obviously, this is true for any job you apply for, but restaurant jobs, in particular, tend to have schedules that move around a bit. A server at a popular restaurant can easily expect to earn $15-$20 per hour, including tips, during a shift. Moreover, for those who are people persons, the work is actually pretty fun and the shifts tend to fly by pretty quickly.

As an adjunct to waiting tables, older students (those over 21 — and psychology majors, perhaps) may find bartending to be both fun and lucrative. A popular bartender in a busy bar can make enough money to wonder why he’s attending college in the first place. That is, of course, until he takes a look at his cranky 60-year old co-worker who’s lived his whole adult life behind a bar wearing gin-soaked sleeves. It’s a good way to pay for some college expenses and have a little extra left over, though.

Delivery Driver

For students who have cars, this is a great way to make an hourly wage, possibly earn tips — and get your gas paid for. Most places that hire delivery drivers reimburse mileage at a federally mandated rate. At the 2020 rate of more than 50 cents per mile, the amount you are reimbursed will pay for a gallon of gas every six or seven miles you drive. If you keep your car in good shape and you segregate your fuel reimbursement from your earnings (which you should do for tax purposes, anyway), you will find that most of your routine car-related expenses, including gas, can be covered out of your mileage reimbursement.

As a delivery driver for a courier company, which take packages from business to business, you can easily earn an hourly rate of more than $10 plus a mileage reimbursement. Food delivery drivers can expect to make a base hourly rate near minimum wage, the mileage reimbursement and, in most cases, tips, which can raise your hourly gross by several dollars if you work for a busy or popular restaurant.

As you can tell with the direction I took with in post, I am a firm believer in tip-based jobs. The reason for that is they offer one way (especially in a college town) to break away from the pack income-wise and actually make some real money. In areas where hospitality jobs are among the most numerous and easiest to get, the glut of cheap labor represented by the student population tends to keep wages relatively low. With tip-based jobs, you have more control over how much you earn based on your personality and willingness to hustle. The one other benefit of a job in which you earn tips is that you will typically walk away with some cash in your pocket at the end of a shift. It may not always be much, but there is a certain amount of well being that comes with the sense of being able to pay for a cup of coffee when you want it or not having to worry about putting some gas in your car.…

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It’s early September. By now, high school seniors should have all their college applications in to their schools of interest for the 2020-2021 academic year. If you do, great. If not, what I am about to say may be less relevant but you should do it anyway: start filling out your Free Application for Federal Student Aid (FAFSA). Now. Returning student? Cool. The holidays are over and you’re not going back to school for a few days. Fill out your FAFSA. Today. Are you a dependent student? Wonderful. Tell your parents to go online and start entering all their information into the FAFSA.

Regardless of your status as a student, the federal government and whatever school you attend will require you (and your parents) to submit a FAFSA before they can determine how much aid you qualify for. In the world of dwindling financial aid dollars, aid is doled out on a first-come, first-served basis. Moreover, with the entire fiscal cliff fiasco unresolved — just delayed until March 1 — getting your application in and a qualification letter back in the next couple months may be a good thing.

I know it’s early in the year, and you may not have all the information you need, such as tax forms, but you can still use close estimates to get the FAFSA submitted and then amend your application once you have filed your 2019 tax returns. With decent estimates, your award level will be unaffected absent any real major changes or life events such as losing your major source of income or a divorce.

Getting an early jump can also help your school make decisions for school-based aid programs, such as foundation scholarships. Many scholarship programs have application deadlines in the spring. A school will not be able to determine eligibility for many scholarships, particularly those based on need, until a FAFSA has been submitted for the student. No FAFSA, no scholarship: it’s definitely a “you snooze, you lose situation.”

Starting the Process

If your parents (or you, if you are a parent yourself or what colleges so touchingly refer to as a “nontraditional” student) filled out FAFSAs when they went to college, they probably still have nightmares about those multipage blue and white forms that never seem to end. The bad news is that the FAFSA is no shorter today — in fact, with all the Patriot Act stuff, it may be longer than it was a decade or so ago. More positively, though, it is available online, and you can save it as you go. This means that if you need to take a break to dig up some information or stare out at a bird in a tree, you can do so without losing all your work. To begin the FAFSA, visit www.FAFSA.ed.gov and follow the link on the “Start a New Application” button.

If this is your first experience with the FAFSA, pay attention to the questions being asked and the information required. The information gathered from the FAFSA will be used to calculate the Expected Family Contribution (EFC) to your education. This figure is the foundation of what colleges use to decide how much they think you should pay out of pocket and how much aid you should be offered. The assets that are asked about on the FAFSA are given different weights in calculating the EFC. For example, checking and savings accounts or custodial accounts in the name of the student will be counted much more heavily “against” the EFC (i.e. you will be expected to pay more from such accounts) than if the same assets were held in the name of a parent or grandparent.

Tax year 2019 is in the books and there is not much you can do about your income or assets for the past year. However, you can use your experience with this year’s FAFSA as a learning opportunity. Take note of what you listed and disclosed and do some research on this and other sites (like FinAid) about how your assets and their characterization can serve to increase or decrease financial aid eligibility. Talk to your financial planner (but not necessarily anyone who charges to dole out financial aid-specific advice, as such advice is typically redundant to typical financial planning and represents an additional set of funds that won’t be used to pay for college) before you do anything to liquidate or recharacterize your assets, as sometimes the tax hit or costs involved are not worth the potential increase in aid eligibility.

Regardless of your current financial situation, if you think you will need financial aid for the 2020-2021 academic year, fill out your FAFSA now.…

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The end of 2020 apparently hasn’t heralded the end of the world, but it looks like it may bring some unwelcome woes to federal financial aid in the form of the much bandied-about “fiscal cliff.” The implications of this budgetary ultimatum are widespread. One thing that is particularly galling about the whole fiscal cliff thing is that it has dampened overall consumer confidence, according to a McClatchy News Service report, in spite of positive news in both housing and employment numbers. Congressional dithering and ineffectiveness continues to hold back an economy that is taking some forward steps in a general sense, while at the same time making it more difficult and expensive for those who need federal assistance to attend college.

To recap, the fiscal cliff fiasco is the result of the deficit reduction “super committee” that was formed in 2019, allegedly in response to the national deficit crisis we faced (and s

till do). It seems really, though, that the timing had more to do with presidential politics and the ramping up of campaigns for the 2020 elections. Indeed, all the Iron Men of Congress did, in fact, was agree to disagree, throw in their towels, and go home for the 2019 Thanksgiving break. According to the bipartisan committee’s own charter, they had until Nov. 23, 2018, to pare $1.2 trillion from the budget over the next 10 fiscal years. Their failure to do so, or to reach some kind of alternative with Congress, triggered a “fail safe” provision that will slice broad chunks off the 2020 fiscal budget. Unless Congress reaches some form of compromise by Jan. 2, 2020, to halt the impending crisis at cliff’s edge, the sweeping cuts will come into play. The destruction will include an 8% swath through existing financial aid programs.

Compounding the problem is the fact that the Higher Education Act, which is the main legislative vehicle for determining how much aid the government offers to students, is due for Congressional reauthorization in the next year. Certainly the impending crisis created by the flailing arms and gnashing teeth of the fiscal cliff bugaboo will not dispose anyone too positively toward tossing more money into legislation that actually results in an outflow of dollars. The climate, therefore, could not be much worse for a reauthorization scenario. This leaves students and their families looking at the automatic cuts to all student aid, including work study and loans, as well as the possibility of further reductions in the future if the Higher Education Act is not reauthorized to its current level of funding. One positive piece of news amidst the disasterspeak (which I myself am propagating in this post, I know) is that Pell Grant award levels are safe through 2020.

Now that we can be relatively certain that our interpretation of the Mayan calendar was a little bit off, and Congress can no longer dodge the issue with global destruction as an excuse, our elected representatives need to wipe their eggnog mustaches from their lips and get back to the bargaining table in order to avert what may looks to be a real disaster. In addition to the fiscal cliff, which affects direct aid sources to students, the January 2 effective date also brings the expiration of several tax breaks related to educational expenditures. The American Opportunity Tax Credit is up for renewal. Currently, the AOTC provides a credit as large as $2,500 per year over a period of four years during which a student pays college tuition. The $10,000 over four years will be rolled back to $4,000 over two years — a 60% reduction — if the credit is not renewed. Moreover, higher earners who have few options for financial aid apart from loans, will no longer be able to deduct the interest they pay on such loans. The annual limits for contributions to Coverdell Education Savings accounts will also be slashed by 75% ($2,000 to $500).

The question really comes down to how much Congress cares about funding student aid. Financial aid was a hot-button issue on both sides of the aisle during the last year’s campaigning as candidates scurried to curry favor with student voters. On the other hand, students tend to be an easy constituency to ignore in between elections as they have little clout in the way of contributions or voices backed with any kind of fiscal amplification. If Congress does swoop in and play hero to students looking to pay for their classes, the good news is that any deal made (even if it’s done past the Jan. 2 deadline) will likely be retroactive. So we’ve got that to look forward to. If it happens. Meanwhile, the time we spend being stressed out and distracted over the ridiculousness of this sandbox spat is time that we will never recover. Thank you elected officials.…

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