<p>I remember hearing that there will be a 2500.00/year tax deduction (credit?)/child. Is this effective this year? My son is in school- wondering if it will be a deduction we can take. Then for next year, would it really be 5000.00?</p>
<p>Can't recall if this was a proposal or actually passed. Thanks</p>
<p>Where have you heard $5000? I have certainly not heard that.</p>
<p>Yes there is a tax credit. There already were 2 tax credits - the Hope and the Lifetime learning credit (which cannot be taken in the same year for the same student). </p>
<p>The new tax credit is instead of the Hope tax credit. The Hope max was $1800 and it was only for the 1st 2 years of college and non of it was refundable (meaning if your total tax liability was less than $1800 you could not get more than your tax liability back). As far as I can recall the new credit is a max of $2500 and is for 4 years (but just through 2009 & 2010 tax years). It is 100% of the first $2000 of tuition/fees and 25% of the next $2000. Up to $1000 of it is refundable. </p>
<p>There are income limitations. The IRS publication with education tax benefits is IRS970. The 2009 one is not out yet but the 2008 one will give you an idea of the previous rules.</p>
<p><a href=“http://www.irs.gov/pub/irs-pdf/p970.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/p970.pdf</a></p>
<p>The new tax credit may be taking the place of the HOPE…but it is available to a higher level of income earners. The HOPE phased out for folks with incomes above a certain amount. We didn’t EVER qualify for the Hope credit, but we WILL qualify for this new one…woo hoo.</p>
<p>What if we "give’ our daughter the money by transferring it into her account that she then pays with (how we do most of it now)? Are we still able to claim that amount as education expenses if it is written out to her instead of directly to school?</p>
<p>And, is it possible for a student to claim part, and parent part of it as long as it does not exceed them maximum per student?</p>
<p>And lastly, does this only apply to tuition and fees, and NOT room and board? My understanding is that her Staford loans went directly to pay for tuition (covered all but about $100 of it), so in essence all of our expenses are ‘fees’ (about $1000) and R&B (about $6000).</p>
<p>Thanks</p>
<p>DJD</p>
<p>Assuming the general rules are the same as for the current tax credits then the tax credit cannot be partly claimed by a parent and by the child. Only by one or the other. It depends on who takes the student as an exemption on their tax return. If you claim your child as a dependent on your tax return then you claim the credit (assuming you are otherwise eligible). If the parents claims the student as a dependent on their tax returns then, for the purpose of claiming the education tax credits, any qualified expenses paid are treated as if they were paid by the parent. This includes expenses paid with the proceeds of loans. If you do not claim the child as a dependent then only they can claim the credit. From IRS 970 <a href=“http://www.irs.gov/pub/irs-pdf/p970.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/p970.pdf</a></p>
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<p>I wonder if any such thing will be means tested…in the past, we’ve never gotten any stimulus checks or anything because of means testing. What really annoyed us was that people who didn’t pay ANY taxes received the tax credit! WTHeck!</p>
<p>There are income limits for the education tax credits. This one has a higher income limit than the previous ones but I don’t know what they are offhand. </p>
<p>Previous education tax credits have not been refundable credits (meaning you could not get more many back than you actually incurred in taxes). This one is partially refundable. $1000 of it is refundable so people with low tax liabilities can get up to $1000 back.</p>
<p>edit - income limits before the credit starts phasing out are $80k or $160k for couples.</p>
<p><a href=“http://www.irs.gov/newsroom/article/0,,id=213012,00.html[/url]”>http://www.irs.gov/newsroom/article/0,,id=213012,00.html</a></p>
<p>My son worked last summer and he is also working part time right now while in school. His scholarship exceeds his tuition, books, and fees. If I do not claim him as a dependent when I file my tax return next year, can he claim the education tax credit on his tax return? Thank you in advance.</p>
<p>Kind of depends. If his scholarship specifies that it is for tuition/fees then probably not. However if his scholarship does not specify what costs it is for he can make the scholarship taxable (scholarships used to pay for non qualified expenses are taxable income) then claim the tax credit.</p>
<p>My daughter has a scholarship that is in 2 parts. One part is a tuition waiver. As that is specifically for tuition she cannot use those tuition costs for the tax credit. The other part is a cash scholarship that does not specify what it must be spent on. So as far as taxes are concerned we elect to use the cash scholarship for non qualified education expenses (such as room and board) making the scholarship money taxable, and then use the qualified fees to claim the tax credits.</p>
<p>swimcatsmom, thank you very much for the information. Yes, he did pay tax on part of his scholarship last year. Since he also work this year, the tax bill will be higher so the tax credit will come in handy for him.</p>
<p>One thing most people don’t know is that the expenses have to be paid with non tax deferred money. If you have a 529 account and pay the expenses with that money you can’t take the credit. It’s double dipping.</p>
<p>It is the same for all the education tax benefits (and probably most tax benefits in general). You can’t use the same expense for more than one tax benefit. IRS970, linked in post #5, has all the education tax benefit rules (though not updated for 2009 taxes yet, soon hopefully). Worth having a look through in advance as you can often choose the benefit most beneficial to your particular case.</p>