<p>How do you deal with college credits and / Deductions when the school year starts in one year but ends in another? What if you are paying out over the school year?</p>
<p>I'm confused.</p>
<p>I assume you mean for tax purposes…
For taxes the date a payment or withdrawal (from a 529) is made determines what tax year it applies to. For example, if your payment for the the second semester of the 2011-2012 school year is paid in December, then it applies to your 2011 tax year. It does not matter that the payment is for the semester that will not start until 2012. If this payment is is paid in January, then is applies to your 2012 tax year.</p>
<p>Is it only based on when you make the payment or when the school issues the 1098? We had tuition billed in Dec 2010 for Jan 2011 semester, that was paid in Jan 2011, but the school issued the 1098 for 2010. As a matter of fact, we had received the 1098 for the full amount before we paid the second half. When we did the section in TurboTax, there was some verbage that said any payment made in 2010 or the first three months of 2011 could be deducted in 2010. So could it go either way?</p>
<p>Four academic years can involve five (or more if you take time off along the way) tax years. If you read through the instructions carefully at [Internal</a> Revenue Service](<a href=“http://www.irs.gov%5DInternal”>http://www.irs.gov) you will find examples of how to use the deductions and credits in different situations. In our case, it makes sense to not use either of these for the tax year associated with the first (fall 2010) semester, so that they can be used in the tax year associated with the last (spring 2014) semester. I was happy to find out that this is possible.</p>
<p>Take the time to read through the instructions. They really aren’t as difficult to understand as they may seem at first glance, and they are available both in html and in pdf format.</p>
<p>Good luck!</p>
<p>happymom, there currently is a limit of 4 years for the American Opportunity Credit (formerly the Hope Credit). BUT - it’s not at all clear that the AOC will still be around more than another year or two, or that it won’t be decreased back to the previous Hope maximum of $1800 (current max for AOC is $2500). The old Hope Credit used to only be good for two years - it would not surprise me if Congress put it back to the old $1800 limit and two-years-only situation. So you may be making a mistake by not taking the credit when you can.</p>
<p>You should also be aware that, at least currently, there is NO limit to the number of years that you can take the Lifetime Learning Credit (or, IIRC, the tuition and fees deduction, but I am not as familiar with that one).</p>
<p>Even if you don’t use the AOC for 2010, you probably should at least take one of the others.</p>
<p>MomCat2 -</p>
<p>Happykid has a 15 credit tuition and fees scholarship this year at our local community college which means that her expenses that could be applied for 2010 came to a whopping $596.63. If the AOC does disappear before her expected last semester at her transfer university in 2012, I’ll just file a 1040x for 2010 and claim them. Unless she lands a full tuition, fees, and more scholarship at that transfer university, it is almost certain that her last semesters expenses will be more than her first and it would be nice to be able to take a bigger credit in the future.</p>
<p>Good thinking happymom! (about filing a 1040X if the AOC goes away)</p>
<p>I think you still could claim the Lifetime Learning Credit for 2010 on the $597. I know we did this when our kids took concurrent enrollment classes at our local CC. Can save you up to 20% of eligible costs. One thing though, <strong>and you’d have to double-check on this</strong> - I think off the top of my head that only tuition and mandatory fees are eligible, not books. If all or most of that $597 was for books, then your savings would be minimal or non-existent.</p>
<p>The only expenses we had were books and materials, so Lifetime Learning wouldn’t work for 2010. Already in 2011 we’ve had almost twice as many expenses as for the first semester because Happykid is taking more credits than covered by her scholarship. With the books and materials for this term, the summer term expenses, and the fall, even if her scholarship is renewed, I’m going to be really happy about the AOC when I file the paperwork for 2011.</p>
<p>And to think I can remember way back in the old days when there were no credits or deductions for this kind of stuff at all!</p>
<p>I’m also a little confused. If my daughter is graduating May 2012, should I claim all of my last qualified expenses on my 2011 taxes, even if I pay the final spring semester in February 2012? Or will I be able to do anything with the spring semester 2012 expenses in the tax year 2012(5th yr)?
I have already received three 1098 T since 2008 and we are only going to be qualified for the 4 years, 2011 will be the 4th year so to speak.</p>
<p>Check this against the example situations at the IRS website. You may be able to claim a Lifetime Learning Credit for that last tuition payment in 2012.</p>
<p>Where is taxguy when we need him? Just because it is April is no reason for him to ignore us now!</p>