Federal tuition credit or deduction?


G

Geoff

My son's tuition is paid out of his own 529 plan. Incredibly
enough, that allows me to take a NYS tuition credit. (thanks
Victor!)

Does anything like that happen on Federal also? Or is he
the only one that can claim the credit/deduction, and only
then if I don't claim him as a deduction?

Any references to clearly explained information would be
appreciated.
 
Last edited by a moderator:
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P

Phil Marti

Geoff said:
My son's tuition is paid out of his own 529 plan. Incredibly
enough, that allows me to take a NYS tuition credit. (thanks
Victor!)

Does anything like that happen on Federal also? Or is he
the only one that can claim the credit/deduction, and only
then if I don't claim him as a deduction?
Several issues at work here. You cannot base any tax
benefit on expenses paid with tax-free distributions from
the 529. If there are qualified expenses above that amount,
a credit or the tuition/fees deduction may be available.

An education credit can be taken only on the return claiming
the student's personal exemption unless no one claims the
student's exemption, in which case the credit can be claimed
only on the student's return.

The tuition deduction can be taken only by the person who
paid it and cannot be claimed on a dependent's return.

All this is covered in IRS Publication 970.
 
Last edited by a moderator:
B

Bill Brown

Geoff said:
My son's tuition is paid out of his own 529 plan. Incredibly
enough, that allows me to take a NYS tuition credit. (thanks
Victor!)

Does anything like that happen on Federal also? Or is he
the only one that can claim the credit/deduction, and only
then if I don't claim him as a deduction?
At the federal level you can't double dip that way. However,
there are qualified expenditures from a 529 plan other than
tuition. Apply the distributions to books, supplies, room
and board, first. Then if there are unused amounts, count
them as tuition payments. Any tuition payment not covered by
the 529 distribution (as used in the suggested order)
remains eligible for the tuition deduction or education
credit.
 
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G

Geoff

Several issues at work here. You cannot base any tax
benefit on expenses paid with tax-free distributions from
the 529. If there are qualified expenses above that amount,
a credit or the tuition/fees deduction may be available.

An education credit can be taken only on the return claiming
the student's personal exemption unless no one claims the
student's exemption, in which case the credit can be claimed
only on the student's return.

The tuition deduction can be taken only by the person who
paid it and cannot be claimed on a dependent's return.
Sucks, but thanks for the information.
 
Last edited by a moderator:

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