There are various tax efficient programs available to ease the burden of higher education costs including exemptions, deductions, deferrals, and credits. Benefits are available for your children and yourself within certain eligibility guidelines.

Let’s explore a diverse range of available programs in detail.

To save primary, an exclusive feature in the college savings community, and secondary educational money for children under the age of 18, different education savings accounts allow anyone, including the student, to contribute $2,000 annually per child. These accounts allow your contributions to grow tax-free until withdrawal.

The modified adjusted gross income for the contributor is limited to $110,000. Taxes are collected from the student at withdrawal on only the earnings portion without the earnings affecting annual taxable income in most cases. Coverdell accounts can be invested as flexibly as an IRA, a benefit that Section 529 programs do not offer.

The opportunity to prepay for future higher educational costs at today’s price is available through state run Section 529 programs. Money is tax-free at withdrawal for qualified higher education expenses. Account holders can change beneficiaries within the same family without a tax penalty.

Though the contributor’s annual income is not limited, 529 programs generally limit a student’s choices in school within the program’s state. While the account owner and beneficiary have no option to direct investments, they may be allowed by the state to select the type of investment.

Tax benefits can also be found with other investments when used for higher education to include Traditional and Roth Individual Retirement Accounts (IRAs) and Savings Bonds.

Variations of the Individual Retirement Account can also be withdrawn to pay for college without the normal penalties for early withdrawal. Federal Bonds, in this instance, withdraw tax-free interest if used for self or immediate family and given a modified adjusted gross income within guidelines.

Further, tax credits are available through the Hope credit and the lifetime-learning credit and income may be excluded when filing taxes for interest paid on student loans.

Check with your financial and tax advisory persons or institutions to learn which options best suit your needs and better determine if more than one benefit can be applied.