<p>Does anyone know of a thread, or have you done so yourself, where you attempt to "optimize" or determine the true cost of college expenses?</p>
<p>For instance thing that occur to me:
- I am paying $5K for Board but #1 son will not be eating at home for 9 months. There is probably some savings there, right?
- It looks like there is a tax deduction of $4000 for college expenses paid by me for a dependent.
- If I paid colleges expenses with a mortgage there would be a deduction
- If I put money into a 529 and then paid the college from that I would get a state tax deduction. </p>
<p>I am having no problem finding hidden extra fees in the college experience, but I am wondering if there are also some ways to save.</p>
<p>You would get the American Opportunity Tax Credit on your IRS return of $2500, every year for 4 years.
Your federal income taxes would be reduced by $2500.00.</p>
<p>There is some overlap so year child graduates in May you could use the Lifetime Learning Tax Credit for $2,000 for that year, if he is on your tax return as a dependent. There are requirements for these education tax credits, you can look up in the IRS website. As I recall you cannot make over 180k per year and cannot file as married, filing separately.</p>
<p>Some car insurance companies have a classification for college students as an occasional driver.
Your grocery bill goes down, unless you have other children at home.
Your electric bill also goes down, but goes up in December between semesters. LOL…</p>
<p>Also have your child buy used text books or rent them.
Half dot com or Amazon are good, kids send me the links for books I ship directly to them.</p>
<p>Ah! The text book rental is a great tip. We toured one school that had a rental system through the school that was a fixed $250 regardless of the classes and number and that seemed like a great deal. I dont think Amazon’s rental discounts that deeply but anything helps. </p>
<p>That is not the figure for the AOC. It may be the maximum for the Lifetime Learning Credit which is a deduction against income on the first page of the 1040 (before the AGI is calculated). You can take that credit for continuing education, or for tuition and fees after the first four years of college. In almost every case, for a student who is an undergraduate, the AOC which is a credit against the taxes (on the second page of the 1040, after the tax due on the AGI after standard/itemized deductions and exemptions has been calculated) is the better deal. </p>
<p>The LLC includes only tuition and fees. The AOC includes tuition, fees, books, and any required materials (yup those hideously expensive left-handed dressmaker’s shears required for that one costume design class). The LLC is whenever in your life, and not just college classes but also continuing ed. The AOC is only in four tax years that are part of the probably five tax years your kid will be an undergrad. Most families will use the AOC for four tax years and the LLC for the fifth (and later) tax years. Read all about it at <a href=“http://www.irs.gov/pub/irs-pdf/p970.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/p970.pdf</a></p>
<p>For books check into the e-reader versions. Purchasing is typically cheaper, in a few cases (typically classic novels) they are free, and many offer a rental option based on a number of days. I believe both the Barnes and Noble (nook) and Amazon (kindle) offer the reader software free for download to be installed on a laptop if you do not have their device. </p>
<p>My DD actually likes e-books better than an actual book as she has become quite adept at using the annotation and bookmarking features of the e-readers and finds it very helpful when it comes time to study and find specific topics.</p>
<p>If you receive a form 1098-T from your child’s school totaling over $4,000 of qualified expenses, you use IRS tax form 8863 for American Opportunity Tax Credit. Form 8863 directs you to use their line 8 of $1000, to be put on line 66 Form 1040, this would be refundable if you did not owe any federal income taxes.</p>
<p>From Form 8863 line 19 for nonrefundable education tax credit you are directed to put $1500 on your 1040 line 49, reducing your federal taxes by $1500. </p>
<p>Your mileage may vary with this AOC, if you owe federal income taxes every year, then you will receive $2500 in tax credits for each college student with at least $4000 in qualifying expenses from Form 1098-T.</p>
<p>If you do not owe enough in federal income taxes then, line 66 on your 1040, of $1000 may be refunded to you partially or the full amount depending on what you owe in federal income taxes.</p>
<p>So yes, if you owe enough in federal income taxes every year for the four years your child is in college, you could get $2500 each of those years in a federal income tax credit, or save $10,000 off your federal income taxes over 4 years. Once child graduates, the Life Time Learning Credit is available to him if he is independent or to anyone who pursues a college education by taking courses part-time, full-time etc.</p>
<p>In some cases you’re transferring costs from your home to the college. You’re buying less food because the student is away, but your paying for board. Having one less person in the house theoretically means you’ll be using less electricity, water, etc.</p>
<p>I noted this on a different forum, when my daughter went away to college we found that we were putting less garbage out at the curb to be picked up. We pay a private contractor to take garbage away. We ended up downsizing to a smaller container, paying less, because we didn’t need to the bigger one because we less one person living there.</p>
<p>All of these savings should be considered when sending a student away to college.</p>
<p>In addition to the things already listed, we will save on music lessons, random classes at the Y, the gas spent driving him around, and any time we eat out, the bill would be reduced by a quarter. Not that we will be eating out for like the next ten years.</p>
<p>If they don’t absolutely need a car at college, try to put-that-off as long as you possibly can. And the old cars you have at home will last longer.</p>
<p>We get a “college student more than 100 miles from home” discount along with the good student discount for car insurance. It really dropped the insurance dramatically.</p>
You’re thinking the Tuition deduction. That reduces your income by $4000. Depending on your tax bracket, other credits, and your state income tax it could be more beneficial than taking the AOC, but usually not. </p>
<p>Lifetime Learning credit is 20% of tuition and is generally only used if the AOC doesn’t apply. For example, if the studenty is not full time, or in grad school.</p>
<p>Thanks to all of you- there has been some very clever advice. </p>
<p>It also turns out that the “recommended” $1800 laptop with the school fixing anything that goes wrong can be obtained for $900 on amazon with a protection plan. </p>
<p>As a first timer, I am learning the COA numbers arent carved in stone. </p>
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<p>Great link and much thanks! Thats a surprisingly readable document for the IRS.</p>