You have a handle on it, but your dollar info is a bit out of date.
The Hope Scholar****p Credit for 2006 taxes is now 100% of the first
$1,100 you paid, plus 50% of the next $1,100 for a maximum credit of
$1,650 (it was adjusted upward in 2006 and might possibly go up again
for the 2007 tax year).
If your son starts college fall 2007, you can get the full credit on
both your 2007 and 2008 tax returns. After that he would move into the
Lifetime Learning Credit which is 20% of the first $10,000 you paid, to
a maximum of $2,000. Depending on what you actually paid, the Lifetime
is sometimes better even in the first two years.
The credits are based on Qualified Expenses, which are defined as
Tuition and Fees. Room and board, books, etc. are not deductible anywhere.
Student loan interest is separately deductible (not a credit) on the
1040 (Line 33 on the 2006 1040, Line 18 on the 1040A).
The Hope Credit is per student, so you would again be able to take it
for your second son for two years, while still taking the Lifetime
Learning Credit (which is per family) for your first son.
Two things to know:
1. The Hope and lifetime Credits have an income phase-out. If parent AGI
exceeds a certain amount the credit starts reducing, and is gone at a
maximum amount. That maximum is currently $110,000 for a joint return,
$55,000 for a single parent. If income exceeds these limits, there is an
Education Expense Deduction (not a credit) of up to $4,000 per family
that may be taken instead, so long as income does not exceed $160K
joint/130K single). You cannot take more than one of these different tax
breaks for each student, but may be able to take more than one when
there are multiple students.
2. There has been new legislation recently introduced in Congress that,
if passed as submitted, would totally replace these education tax breaks
with a new single program for 2008. Depending on the final rules, if
passed, it may increase the tax break, allow it to include expenses for
room and board etc., and depending on an individual family's situation
be better than the current ones (or not)
Steven B. Blank
College Financial Aid Consultants
29 Ives Hill Court
Che****re, CT 06410
(203)250-7761
TheBreeze said the following on 6/7/2007 4:00 PM:
> I think I've got the Hope Scholar****p figured out--I can take 100% of
the
> first $1000 of tuition I pay for my son, and 50% of the second $1000 of
> tuition. I can take this credit on my taxes for the first two years he's
in
> college (full time student, etc.). It just dawned on me, though, that
the
> tax year doesn't align with the school year. So, I'd be able to get the
full
> $1500 credit this year for just his fall semester, then the same next
year
> for the spring and fall semesters that fall in the 2008 tax year. Is
that
> true?
>
> So, after that, I've used up the two years max I can take the Hope
> Scholar****p credit for him, and then start taking the LLC? Or is there
> something else?
>
> Also, are the tuition and room/board deductible on our taxes? How about
> interest on unsubsidized loans (where the interest is payable starting
on
> day #1 rather than after graduation)? Are there other deductible
expenses
> for parents paying some of the tuition, room/board, books, etc.?
>
> Is there any influence when son #2 goes to college in son #1's senior
year?
>
> Thanks for your input.
>
>
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