<p>Happykid has a tuition and fees scholarship for next 2010-2011 that covers the first 15 credits each semester. We will be responsible for tuition and fees for credits in excess of 15, her computer, books, and supplies. She will be commuting and can ride the city bus for free.</p>
<p>Which Credit is likely to work best for us, and what kind of documentation will we need for the eligible expenses?</p>
<p>Given that her education is likely to involve the five tax years 2010, 2011, 2012, 2013, 2014, and that 2010 is likely to be the year with the lowest college-related expense, would there be merit in not taking any credit for 2010 and using the credits for tax years 2011 through 2014 instead?</p>
<p>Please advise.</p>
<p>The Hope Credit is now called the American Opportunity Credit, so I’m not sure what your question is. You can find a lot of information on the IRS website (irs.gov) by typing your question into the search box. The AOC is for 2009 and 2010. I believe that the education credit(s) for 2011 have not yet been determined.</p>
<p>Here is a link to a Q&A:</p>
<p>[American</a> Opportunity Credit: Questions and Answers](<a href=“http://www.irs.gov/newsroom/article/0,,id=211309,00.html]American”>http://www.irs.gov/newsroom/article/0,,id=211309,00.html)</p>
<p>There would be no merit in not taking credit during 2010 - you’d be losing $$$.</p>
<p>The 2009 tax information lists these two credits separately. It looks like the Hope rules may only exist for students from the Midwestern disaster areas (2008 flood) which means that it isn’t for us anyway.</p>
<p>So this means that my question boils down to: Claim the credits for 2010, 2011, 2012, and 2013 or for 2011, 2012, 2013, and 21014 (or for some other four tax year combination from those five calendar years)?<br>
Tax year 2010 our expenses will be well under $1000 for books, materials, and perhaps one credit as the scholarship covers 15 credits.<br>
Tax year 2011 our expenses will encompass books and materials for two semesters and possibly full tuition/fees for the first semester of school year 2011-2012 (if the scholarship is not renewed), so anywhere from $1000 to $4500.
Tax year 2012 will include one semester at the community college and one semester at presumably much higher tuition/fees and almost certainly with room and board at the transfer-to institution (not identified at this point). If that institution hits us for our full EFC, the total for the year for both places would be upwards of $11,000. Possibly closer to $15,000.
Tax year 2013 presumably a full year at the new institution, and if full EFC is expected, expenses upwards of $20,000.
Tax year 2014 if all goes well, the final semester to complete the Bachelor’s degree, again upwards of $10,000.</p>
<p>Since there are no tuition and fees for 2010-2011 there is no point in taking the Tuition and Fees Deduction, but that might make sense further on. And there is always the Lifetime Learning Credit that could be used I suppose for the last semester.</p>
<p>If you qualify for the education credits (and if they have more tax benefit to you than the tuition and fees deduction), you would take them all of the years your child is in college. It doesn’t make sense to not claim a credit you are eligible for in 2010 because whether or not you claim the credit, that still counts as the first year of college. The tax law for education credits for 2011 has not yet been determined, but based in general on previous law, you would take the American Opportunity Credit (previously the Hope Credit) for the first two tax years, and the lifetime learning credit for all of the subsequent years. At this point, the American Opportunity Credit is only for 2009 and 2010 tax years.</p>
<p>Is it possible that your child’s college would let you ‘apply’ the amount of the scholarship against room/board instead of against tuition?</p>
<p>If you pay by December 2010 for credits above 15 for the Spring 2011 semester, you can count this tuition payment in the calculation of the 2010 American Opportunity Credit.</p>
<p>Does you daughter’s school require that she purchase a laptop? If so, this expense along with fees and books are amounts which can be included in the calculation of the credit.</p>
<p>Since she’s living at home, I don’t think we can do anything about swapping out the r+b expenses for tuition and fees. There is no requirement to get a laptop, so the only expenses we will have will be books and tuition/fees for any credits over 15. If we can wait to use the credits for expenses in semester 2, and summer school fees (not covered by the scholarship), I’d really rather leave this whole business until tax year 2011.</p>
<p>The Fall 2010 semester is ‘year 1’. You don’t have a choice to not count this as the first year of college for purposes of the education credits.</p>
<p>Amounts paid in 2011 for Spring 2011*, Summer 2011 and Fall 2011 semesters are ‘year 2’.</p>
<p>As I mentioned, you could purchase books and pay tuition and fees for *Spring 2011 by December 2010 in order to include these amounts instead in the calculation of the credit you claim on your 2010 tax return.</p>
<p>(I think living at home is a smart thing to do).</p>
<p>Thanks for the clarification about having to use fall 2010 as year 1 for taxes! We will see how many of the books, and how much of the extra tuition/fees (if any) for semester 2 we can squeeze in before the calendar year ends. </p>
<p>We had expected to pay for the two years at community college out-of-pocket. Since each semester would be roughly $2500 for tuition and fees, much of our expense would be covered by the various options for tax credits and deductions. That there is not so much to be recovered is truly a good thing, but it did leave me with a whole set of tax-related questions!</p>
<p>There is an Obama proposal to make the American Opportunity Credit (of up to $2,500 during the first 4 years postsecondary education) permanent. That would be great, though I have not heard any tax news lately in this area.</p>
<p>[Obama’s</a> 2011 Budget Proposal Increases Pell Funding, Cuts LEAP and Byrd Scholarship](<a href=“http://www.nasfaa.org/publications/2010/g2011budget020210.html]Obama’s”>http://www.nasfaa.org/publications/2010/g2011budget020210.html)</p>