We will not have any left over 
Over four years, Loyola will cost more than we have saved. Weāll basically be looking at spending the saved money evenly spread across four years and raising a modest amount to make up the difference each year vs. spending more of the saved money in freshman and sophomore years, and using more of our income in the latter years.
1 Like
In that situation, if you can swing it, I would spend down your savings earlier so that you donāt lose the 5.6% each year on the remainder.
what is the AOTC?
Every year after tax season, I put my taxes in a file cabinetā¦and glance over the files of the past year. My eyes always stop on one particularly fat file from my Dās college tuition, expenses, 529s etc. I used to pull it out on occasion and look through the mountain of workā¦documents, post-its, print outsā¦all proving Iām doing it right (or at least trying). No one has ever asked to see my impressive work. It really is quite a masterpiece. In a few years, Iāll throw it all away.
What a strange thing to make you feel nostalgicā¦
1 Like
It is a tax credit (not deduction) on the first 4,000 of college tuition expenses (not room and board).
It stands for American Opportunity Tax Credit.
There is also the Lifetime Learning Credit, but it is not as generous.
There is also a tax deduction for student loan interest.
3 Likes
Does this sound right? As far as I understand it, @Shellg , if you qualify due to income level for the AOTC, you want to pay for at least 4k of tuition with current income, not savings. You can take 2500 off your taxes.
You can only do the AOTC (IIRC) for four yearsā¦so just make sure you do your spending during the years you wish to take it.
@MMRose can clarifyā¦but I believe you can only use your 529 money for actual expenses you paid in that calendar year. So I believe there is a timing issue when paying your college bills.
And like I saidā¦keep track yourselves of what you expend.
1 Like
Yes to the 4k and yes to the 2500 BUT Iām not sure on income vs savingsā¦my husband is a CPA but we havenāt investigated it at all bc we donāt qualify.
I believe publication IRS 970 deals with some of these questionsā¦but Iāve also heard that itās not the clearest language on the planet.
Thatā¦would be putting it mildly!!!
1 Like
Yes, we just waited over a week for our accountant to do research and read opinions based on a (simple? hah!) question we had regarding Pub. 970.
We just found out about the tax credit because we received the 1099s for our Dās DE classes, forwarded them to our accountant with our tax material, and saw the credit on the return. It was nice, but in actuality, since our D is aging out of the child tax credit, itās a wash.
I think by āsavingsā I should have been clearer. I mean the money saved in the 529. I think we can probably use our own parentsā savings to pay the bills if we want.
itās why i use turbotax - i get in and start playing around.
not sure itās always right - but if i took my kidās expenses below a 529 removal, then it added some taxā¦i just play around to see how different scenarios work.
1 Like
Sounds like we could pay a bunch of bills in the fall with the 529, but make sure we pay at least 4,000 not-from-the-529. Then, we would get the tax credit for 2023. If we always did it in fall, we would have four years of credits. I know plans can change a LOT, but our kid does not plan to go to grad school, and since our 529 is not huge, Iām sure itās going to be spent in the next four.
Perhaps Iāll download IRS 970 for when I canāt sleep. 
Iām totally NOT an expert on 529 plans. We never had one. The folks who have and use these are your best sourceā¦unless @BelknapPoint responds!
1 Like
Got it. 
I wonāt rely on anything that I learn here without getting professional help to confirm. Itās really helpful to know tips, but I realize most people here are not pros.
I tried to read this thread a couple of times, but I donāt understand what it is that you are saying gets assessed a 5.6% penalty each year. Would you mind explaining or telling me what to google in order to better understand? Thank you! Anything investment-related always makes me feel like Iām talking in a foreign language.
Itās not a penalty, it is the annual amount that is considered available for tuition from any investments, cash, 529, rental income, etc., that you hold. It does not include equity in your primary residence for FAFsa; some CSS schools will add part or all of that back in. Any assets held in the childās name (other than the 529 which is considered a parental asset regardless of whose name itās in) is assessed at 20%. Depending on what the 529 is earning - which right now is probably not much - the advice is to spend down in order to qualify for more aid. I think each family has to decide if that is worth not having the reserve for later years. On the other hand spending student assets earlier in the process is a no-brainer.
1 Like
Your parent assets amount adds 5.6% to your family contribution for FAFSA purposes.
2 Likes