<p>As most of you know, you have three options concerning tax deductions and tuition payments (tuition deduction, Hope and Lifetime Learning Credits) Many of you have accountants who will determine which is most beneficial from a tax point of view. </p>
<p>However, for those of you with moderate to high assets and an income just above 50K you should consider taking the tuition deduction (up to 4K) since this is an above the line deduction that could reduce your AGI, and possibly make you eligible for the simplified means test (assets not considered)</p>
<p>I am really confused about all the possible education deductions and credits. Can any of you accountants shed any light on the subject? What should a student take if he/she is not being claimed as a deduction on parents' return (paying for college out of savings) and has a very low income?</p>
<p>lists all the various tax benefits. Which will be the best for you to take would depend on how much you have in the way of qualified expenses and how much tax you might save based on your income. The tax credits are not the type where you get back more tax than you actually incurred. For instance the Hope credit maximum is $1650 - if you only incur $800 in taxes you will just save the $800. You won't get an extra credit back.</p>
<p>Look over the publication and see if you have any questions. Your question is too broad to give an answer to.</p>
<p>Swimcatsmom is correct, you should look at publication 970 and fill out all the worksheets to determine which one gives you the best tax benefit. It's not an answer we can give you based on your info (independent with a low income) I guess my first question is when you say low income, how low is low? Do you end up with any tax liability at all?? If not, then the tax deductions and credits won't help. I can say that when I was in grad school (did not have the Hope option) I typically found that the difference in my taxes between the Lifetime Learning credits and the tuition deduction was minimal. </p>
<p>The point in my original post was that some people should also determine which may give them the greatest financial aid benefit for the following year. If someone is able to deduct 4K from their AGI, it could impact their EFC for the following year, especially if they become eligible for the simplified means test.</p>
<p>I would recommend you go to the irs website and use the free file option. Those programs will calculate which is best for you. Keep in mind however, that programs like Turbo tax will only consider which gives you the most benefit on the Federal return but doesnt' take into account what it would do on the State. Because the tuition deduction lowers your AGI, it benefits the state too.</p>
<p>Good news. Maximum amount of Hope credit increased. Was $1650. Beginning in 2008, is $1,800 ($3,600 if a student in a Midwestern disaster area).</p>