Did I pay college tuition?

Discussion in 'Tax' started by Troubled, Mar 1, 2014.

  1. Troubled

    Troubled Guest

    On my NYS income tax it asks what I paid for college tuition.
    Well, I paid my son's tuition bill, but I made the payment out of a 529 plan he owns; but of course he is my dependent.
    For income tax purposes did I pay it?
    Troubled, Mar 1, 2014
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  2. Troubled

    remove ps Guest

    Because you used a 529 plan you don't get a tax deduction, such as the
    AOC, lifetime learning credit, tuition and fees deduction, etc on the
    that amount. You can still use these education credits for other
    amounts paid for out of pocket.
    remove ps, Mar 2, 2014
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  3. Troubled

    Alan Guest

    Yes. See the NYS instructions for form IT-272
    Alan, Mar 2, 2014
  4. Troubled

    Alan Guest

    The question was about NY state income taxes, not federal.
    That said, your answer for federal purposes is not accurate. You can't get a double benefit by using the same qualified expenses for determining the taxable part of a QTP distribution and again for computing the AOTC or LLC or T&F deduction. That does not mean that using a 529 plan to pay qualified expenses prevents you from obtaining one of the other benefits. In fact, as the AOTC is the best benefit, it is always in your best interest to maximize that amount by paying the qualifying expenses any way you can.
    E.g., You withdraw $5000 from a QTP and pay $4000 of qualified expenses. This triggers a $2500 tax credit of which $1000 is refundable. If some part of the QTP distribution included earnings, then none of the $4000 of expenses could be used in determining the taxable portion.
    Alan, Mar 2, 2014
  5. Troubled


    Jan 3, 2014
    Likes Received:
    Tyler, Texas
    That is not exactly true. First, 529 earnings are taxable or excluded on a pro rata basis. If 10% of the distribution is earnings 10% is excludable if paid for qualifying expenses. Secondly, the taxpayer has the option of including that amount in taxable income and using that amount to increase qualifying expenses for education credits.
    Finally, 529 plans are special in that you can exclude taxable amounts paid for room and board as well. Room and board is not a qualifying expense for education credits.
    See the gory details at http://www.law.cornell.edu/uscode/text/26/529
    dbell154, Jan 22, 2015
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