Wasted Credit

Today TaxMama hears from Eddie in Tampa, Florida, who has this tale of woe. “For the first half of 2005, I was living off of my unemployment benefits, and then a VA stipend, which wasn’t taxable.

From late May until end of August, I had work-study. From August until the present, I have lived entirely off of my MGI Bill and VA disability compensation, both of which are non-taxable. I am interested in getting the HOPE Tax Credit, since I’ve been in school since May.

But since I have had almost no taxable income for 2005, will I be able to do so? How would I go about preparing my 05 taxes?

Hi Eddie,

What an interesting year. It doesn’t look as if you have much in the way of taxable income, does it?

The unemployment income is taxable.

The work-study income is taxable – if the money was not used for tuition or books.

Once you’ve entered all that income into the tax return, enter your education expenses to see if the Hope Credit works for you.

If you owe any taxes, the credit should wipe them out.

But I know what you’re really asking. You’re asking – if my taxes are so low that I can’t use my education credits or expenses, can I use them in the future?

Nope.

With these expenses, each year stands on it’s own.

You should probably be able to have your taxes prepared for free through the IRS’s Free Filing Alliance.

They have a nifty tool on the site called “Guide Me To A Service” that asks you questions, then points you to the right service.

But if you still have access to the VA, find out if they have any VITA volunteers preparing tax returns. See if they can do it for you. They’re under the supervision of IRS staff. So, even if they prepare your return with errors, you won’t get into trouble. Better than if you do with errors.

Take care of yourself.

Remember, you’ll find answers to questions about filing your return and all kinds of tax issues, free. Where? Where else? At TaxMama.com

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