<p>Hi, All, As I understand it, Room & board is not deductible with Hope / Lifetime Deductions Plus since I received a Sate tax deduction when I deposited the money into the 529 I do not get a tax break again for this money.
So, I will use $2200 cash to get the full Hope deduction and then use 10K out of my 529 accounts for room and board.
Now I am not sure if there is a federal deduction for the 529 - 10k base money compared to the interest income that the money earned in the 529 accounts</p>
<p>The IRs publication for education deductions is IRS970
<a href="http://www.irs.gov/pub/irs-pdf/p970.pdf%5B/url%5D">http://www.irs.gov/pub/irs-pdf/p970.pdf</a></p>
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Room & board is not deductible with Hope / Lifetime Deductions
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That is correct.</p>
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Plus since I received a Sate tax deduction when I deposited the money into the 529 I do not get a tax break again for this money.
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The money withdrawn from a 529 account is tax free as long as it is to pay for qualified education expenses. (see page 49 on the link).</p>
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So, I will use $2200 cash to get the full Hope deduction and then use 10K out of my 529 accounts for room and board.
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Yes that works. Pay the tuition/fees with cash and you can claim the Hope credit if you qualify (income wise etc). For 529 withdrawal room and board is a qualified expense.</p>
<p>If you have any scholarships or grants (including need based grants) don't forget to include them in your tax planning.</p>
<p>Hi, the last part you say: ” If you have any scholarships or grants (including need based grants) don't forget to include them in your tax planning”
Ouch….Do you mean that if the Scholarship comes from the same school which cost 37K they give you 7k merit scholarship that counts as income? Seams like a discount to me.
What kind of income? Ordinary? Thanks again for your reply.</p>
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If you have any scholarships or grants (including need based grants) don't forget to include them in your tax planning”
Ouch….Do you mean that if the Scholarship comes from the same school which cost 37K they give you 7k merit scholarship that counts as income?
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</p>
<p>Not all scholarships count as income but some do. Scholarships/grants up to the cost of tuition/fees/required books are not taxable. Any scholarships over the cost tuition and fees and books are taxable income and must be reported as income. Also you cannot 'double dip' - meaning you cannot use use the same costs for more than one tax break. And if a scholarship is for a specific purpose - such as a tuition waiver - then you cannot use those tuition costs for another tax break such as a Hope tax credit.</p>
<p>For instance my daughter has a full tuition waiver. That 'scholarship' is tax free because it is tuition. We cannot use those tuition cost for a hope tax credit as the scholarship is specifically for that tuition. If the scholarship were not specifically for tuition we could use it to pay say, room and board, and pay for the tuition out of pocket enabling us to claim the tax credit.</p>
<p>Hi, Thanks swimcatsmom for your information. A New wrinkle:
My D still wants to go to her dream school. (Why go to the next choice for pretty much a full ride on the tuition when you could owe 30 -40 k when you’re done, but that’s a different story...)
She is willing to take out the private loans ( I guess with me co-signing) for around 7K per year above the Federal subsidized loans which we already been approved for. As I understand it, since she is my dependant I will be able to take the 7K paid to the school as part of the Hope Deduction ( 3.5 k this year ) so the 5K out of the "529 acct." And 2.2K cash does not matter anymore since I will be maxed out with the 3.5K from the private loan? I think I would be better to use the "529" for the full room and board money and put the 2.2K into the "529" for the additional state deduction. John G.</p>