How To Figure Out Tax Deductions
June 25th, 2010
Question: My dependant son will be attending a community colllege?
How do I figure out which tax approach to use? Hope, lifetime learning, tuition deduction, savings bonds interest exclusion? His tuition is about $3,600/year. Are there any calculators to figure this out?
Answer: Some software has calculators to figure out the best education benefit, but if you really want this analysis you need to go to a tax preparer who can do this for you. Professional preparers with proprietary software can run the numbers for you.
In your case, if your income is less than $80K ($160K if married), the best break for your education expenses is the new American Opportunity Credit which has replaced the Hope Credit. The AOC will credit you 100% of the first $2,000 of qualified expenses, plus 25% of the next $2000 of qualified expenses, for a maximum credit of $2,500. Even if you owe no tax, 40% of this credit is refundable, meaning you may receive a payment of up to $1,000 if you owe no tax but take the maximum credit.
Any expenses you pay for with EE savings bonds for which you exclude the interest will not be counted toward the AOC.
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