"JVC" <nospam[at]nospam.net> wrote:

- quote -

Try www.collegesavings.org

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JVC wrote:

- quote -

I'm not aware of an online calculator for this aspect. In
addition there are now so many different benefits available
for paying for education you need a good tax planning
program or professional to sort it all out. The IRS just
updated their publication on this subject for the 2003 tax
year. (Link is below.) It does a very good job of explaining
each benefit and how they work or don't work with each
other. Basically, there is no double dipping on the tax
benefits. Here's a good summary from the pub:

You cannot do any of the following.
Deduct higher education expenses on your income tax return (as,
for example, a business expense) and also claim a Hope credit
based on those same expenses.

Claim a Hope credit in the same year that you are claiming a
tuition and fees deduction for the same student.

Claim a Hope credit and a lifetime learning credit based on
the same qualified education expenses.

Claim a Hope credit based on the same expenses used to
figure the tax-free portion of a distribution from a
Coverdell education savings account (ESA) or qualified
tuition program (QTP).

Claim a credit based on qualified education expenses paid
with a tax-free scholarship, grant, or employer-provided
educational assistance.

And, if you are cashing in savings bonds to pay for higher
education, before you can exclude any interest you have to
reduce the qualified educational expenses for any other tax
free benefits you receive.

I can tell you that if the expense qualifies for the Hope
Credit (HC), then that is a better deal than the Lifetime
Learning Credit (LLC) until the amount of qualified expense
reaches $7500. Starting in 2003, the LLC expense level
doubled to $10,000. The credit rate is still 20%. So, once
you get over $7500, the LLC will start to exceed the maximum
HC of $1500. If your marginal tax rate is 15% then clearly
the credits are a better deal than the deduction. It's only
when your marginal rate gets to 25% that you would need to
see where you benefit the most. There are also different
income phase-out levels. The deduction phases out at a
higher level of income. Finally, the deduction reduces AGI
which might affect other tax benefits based on AGI. At this
point even I leave it to the software to figure it out.

--

Alan
http://taxtopics.net

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Is there any relatively easy way to figure out which is best
to get tax benefit for college costs? Website/calculator,
etc?

How is "tuition paid" calculated if you had already paid
into a prepaid tuition plan and the plan is paying the
college? Is it based on the amount you paid in to plan or
amount paid by plan to college? What if you got a refund of
the prepaid plan because student received scholarship or
other financial aid?

Hope you folks can help clear up these issues, thank you!

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