<p>We are on a ten month tuition payment plan. I have 4 more monthly payments to make and then we are done for good (or until grad school.) I am sick of making the payments and want to pay it off in a lump sum. Is there any advantage to waiting until after Jan 1st to make the payment or doesn't it matter? I know you can deduct up to $4000 a year so I am thinking after Jan. 1st would be better but I'm not sure. </p>
<p>Are you taking the tuition and fees deduction rather than the American Opportunity Tax Credit or Lifetime Learning Credit?</p>
<p>The tax credits are usually a better deal than the tuition and fees deduction.* You can only use the AOTC for up to four different tax years for each student, so if you have at least two years of eligibility left for the AOTC, it might make sense to delay your final payments until 2015 so that you can take advantage of the credit for this tax year as well as tax year 2015.</p>
<p>*Assuming you are eligible for the credits - there are income limitations.</p>
<p>Forgive me for not knowing the difference between tax deduction and AOTC. I am pretty sure it is the AOTC we take.</p>
<p>If it’s only good for 4 years and we took it for 2011, '12 and '13 then '14 would be the last year we can take the credit? </p>
<p>We started paying tuition in July of '11 (for school year '11-'12.) I guess I should check to see if we took it in '11 for the 5 months of tuition we paid? </p>
<p>If you took it in 11, 12, 13 and (anticipated) 14, then for 2015, consider taking the Lifetime Learning Credit. (A credit of 20% on up to $10,000).</p>
<p>See IRS Publication 970.</p>
<p>Ok Thanks. I will wait for 21015 to pay it off. Appreciate everyone’s assistance!</p>
<p>A tax deduction simply reduces your taxable income. A tax credit reduces the amount of tax you pay dollar for dollar. So a $4,000 tax deduction, for someone in the 15% tax bracket, would reduce the tax bill by $600 (income that would otherwise be taxed at 15% is not taxed). A $4,000 tax credit would reduce the amount of tax owed by $4,000, potentially reducing the amount owed to $0, or even resulting in a payment to the tax payer, if the credit is refundable (the AOTC is partially refundable).</p>
<p>If you’ve already taken the AOTC for three years, then this tax year will be your last opportunity to take it. However, you may be eligible for the Lifetime Learning Credit, which has no max number of years limitation, for tax year 2015. If you are eligible for the LLC in 2015, this would be a good reason to wait to make your final payments until after January 1. The LLC is not as generous as the AOTC, but it’s still pretty good, giving you a 20% tax credit for the first $10,000 you pay in qualified education expenses. Depending on your tax bracket and the amount of remaining payments that could be made in 2015, the LLC may be a better deal than the tuition and fees deduction. You can’t use both at the same time for the same student, so crunch the numbers to see which one works best.</p>
<p>*I mentioned in my previous post the income limitation for the tax credits, forgetting that there are also income limitations for the tuition and fees deduction, and they are all different. Details can be found in IRS pub. 970:</p>
<p><a href=“http://www.irs.gov/pub/irs-pdf/p970.pdf”>http://www.irs.gov/pub/irs-pdf/p970.pdf</a></p>
<p>ETA: double posted with Madison85. I’m glad that we offered then same advice.</p>
<p>Thanks for the link Middkidd. </p>
<p>It looks like we will be eligible for the LLC as we are under the MAGI limit for married filing jointly. </p>
<p>I will definitely wait especially since it’s only a matter of weeks. I’m just so ready to cross tuition payments off my list. </p>
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<p>You are very welcome. Just be aware that the linked pub was written for use in preparing 2013 returns. The 2014 version isn’t available yet, from what I can see. Some of the numbers may change, so make sure you use the 2014 version when you actually sit down to do your 2014 taxes.</p>
<p>Will make sure H uses proper version. </p>