<p>The tuition and fees deduction lowers AGI. Sometimes schools and scholarship committess look at the AGI to determine eligibilitiy. For instance, some schools provide loan free packages if the AGI is under $60,000 (or $50,000 or $40,000 depending on the school). It’s been a few years, but I remember some of my son’s state/national scholarship applications even asking for our AGI (and requiring us to send our tax sheet to prove it) so I’m sure they used it. So if one is close to the limit, it might be better to someone to choose the deduction even if they wind up paying a bit more in taxes. Does that make sense?</p>
<p>…“So if one is close to the limit, it might be better to someone to choose the deduction even if they wind up paying a bit more in taxes. Does that make sense?” it does, but if the amount is very little above that guideline of 60k, I would rather use the credit, because for one, I have no choice. The hope and lifetime won’t be available. This year with the AO act, the amount refunded to you is significant, and if your student has a grant that is taxed, you are better off paying that tax and taking the juicy refund & credit. I don’t think most colleges will penalize an AGI of 60,340. I think the privates are more flexible. The decision to use one or the other has to be weigh after working a couple of tax returns for both the parent and the student. If the student is a freshman, it might or not make a difference in the college decission, but it won’t affect existing grants. Again, I don’t think the guideline is set in stone.</p>