<p>In this morning's WSJ in a story about tax moves prior to 12/31, I read "Write next semester tuition checks before year end. The American Opportunity Tax Credit allows qualified taxpayers to get a benefit this year for next spring's tuition if the payment is made before year-end... see IRS Publication 970."</p>
<p>Can anyone elaborate on this? What will be the difference between a payment made on 12/20 vs. 1/5? I'm not sure I'll even have accurate spring semester bills prior to Jan. 1.</p>
<p>The tax year ends 12-31-12 so anything paid in that tax year counts on this year’s taxes. With the Fiscal Cliff looming, there may not be an Opportunity Tax Credit next year. What will be different on your spring bill from your fall bill. Pay what you think you owe if you want the tax credit.</p>
<p>I plan on taking the tax credit based on my payments for the fall semester, so there would be no benefit of paying the spring bill early, as I have already paid the amount necessary to get the credit. I guess their advice would be to those who did not pay the full amount in the fall (I think it is $4000 paid out of pocket?)</p>
<p>mamabear, are you saying the max credit would be incurred upon paying $4000 in tuition for the calendar year? If so, I did that in a heartbeat in August!</p>
<p>Yup.</p>
<p>For many families, the max would have been hit in the fall semester.</p>
<p>Hi, sorry to ask the obvious but we don’t actually have one enrolled yet (HS senior) – Husband currently in grad school for an MSW, first semester – are you saying there is a $4,000 tax credit for tuition? Is it capped at that amount? Does it count for grad school, or just undergrad dependents? Thanks!</p>
<p>The American Opportunity Credit was originally for 2 years, 2009 and 2010, and was extended for an additional 2 years through the end of 2012. It is set to expire after 2012. If you don’t have the maximum expenditure of $4,000 needed to attain the maximum credit of $2500 (based on 100% of the 1st $2000 expenditure and 25% of the next $2000), then paying the Spring tuition before the end of the year is a good dea.</p>
<p>The AOC is only for undergrad, not for grad school. There is another tax credit, the Lifetime Learning credit, which can be used for grad school. It is less generous than the AOC, a maximum of $2,000 tax credit based on 20% of qualified educational expenses. Non of the LLC is a refundable credit (unlike the AOC which has $1,000 refundable), so you must have $2,000 tax liability and $10,000 expenses to be eligible for the entire $2,000 credit.</p>
<p>This tax credit isn’t for everyone though - </p>
<p>
[American</a> Opportunity Tax Credit](<a href=“http://www.irs.gov/uac/American-Opportunity-Tax-Credit]American”>http://www.irs.gov/uac/American-Opportunity-Tax-Credit)</p>
<p>This also goes for 529 plans as well…</p>
<p>Make sure your distributions match up with the eligible expenses.</p>
<p>For 529 plans though, you can take distributions equal to any scholarships the student receives in the year in which the scholarship was received. That is a nice little bit of the 529 plan that isn’t all that well known.</p>
<p>Be sure you pay taxes on the earnings portion of those 529 distributions for scholarships though.</p>
<p>My DD’s school wants the balance of her spring semester paid up by 12/17. We more than hit the Tax credit amount for fall and I was hoping that spring payment would be able to be applied to next year’s tax bill (she is going to hopefully transfer to a less expensive school next year) as it is for 2013 tuition. Stinks that it ends up being overkill for 2012 taxes.</p>
<p>MomOf3Stars–just tell the school you will pay after the first of the year. Almost every school offers some kind of a monthly payment plan, etc. so they don’t “need” your money in December. As long as you make arrangements they will work with you on that. I wouldn’t pay in full by then if it means a tax savings for you next year.</p>
<p>SteveMA, thanks for the suggestion. I wasn’t sure if I could actually do that but really what is a few weeks to the school as long as they are getting their full payment in the end anyway?</p>
<p>[American</a> Opportunity Tax Credit: Questions and Answers](<a href=“http://www.irs.gov/uac/American-Opportunity-Tax-Credit:-Questions-and-Answers]American”>http://www.irs.gov/uac/American-Opportunity-Tax-Credit:-Questions-and-Answers)</p>
<p>It’s going to be tricky for us…S has a good scholarship that covers most of his tuition + R&B, but I do pay about $4K a year. Whether that goes towards tuition (which is eligible for the credit) R&B (which is not), I’m not sure. Glad to see books and fees are OK this year, first semester was pricey.</p>
<p>Mom of three- have an ACTUAL conversation with someone in the bursar’s office (and note the person’s name and title) before you assume they will allow you to pay late. If you get hit with a $250 late fee and interest, the tax savings won’t seem quite as generous!</p>
<p>We paid our bills at funky times (based on cash flow and some tax considerations) but always after we spoke to the Bursar and got him/her to actually go into our account and move the date for the required payment. That way there’s no chance of an administrative flub or getting billed for a late fee.</p>