How do I maximize my education tax credits?
April 13, 2010 8:09 AM Subscribe
I have two years and $6,500 to pay my tuition. What I want to know is, what should I pay in tax year 2010 and what should I pay in tax year 2011 to maximize educational tax credits?
It doesn't matter to me how I split it up - I could pay it all next month, or put all off until tax year 2011, but I have a feeling there are benefits to splitting it up cleverly to maximize my tax credits in both years.
Possibly relevant info: no scholarships or loans, I'm paying in cash.
What should I do?
It doesn't matter to me how I split it up - I could pay it all next month, or put all off until tax year 2011, but I have a feeling there are benefits to splitting it up cleverly to maximize my tax credits in both years.
Possibly relevant info: no scholarships or loans, I'm paying in cash.
What should I do?
Response by poster: Good question. While I'm not comfortable giving out my salary, for the purposes of clarification, I file singly, in the 25% bracket.
posted by juniperesque at 8:43 AM on April 13, 2010
posted by juniperesque at 8:43 AM on April 13, 2010
Lifetime Learning Tax Credit is 20% of qualified expenses up to $10k. Assuming your tuition is $6500 since you have no scholarships/loans, you would not max out the credit even if you paid it all in one year.
I am less familiar with the Hope Credit, now called the American Opportunity Credit.
posted by sararah at 9:31 AM on April 13, 2010
I am less familiar with the Hope Credit, now called the American Opportunity Credit.
posted by sararah at 9:31 AM on April 13, 2010
American Opportunity Credit is for the first FOUR YEARS of college only, not grad school - 100% of first $2k, and 25% of the next $2k. So if you qualify for this, you could maximize by paying only $4k this year and the remaining $2.5k next year.
AOC = $2.5k credit 2010, $2.125k credit 2011.
Lifetime Learning = $1300 total over 2010 and 2011 no matter how you split it.
So if you qualify for the Hope/AOC credit, that looks like it is the way to go.
IANAAccountant, of course.
posted by sararah at 9:39 AM on April 13, 2010
AOC = $2.5k credit 2010, $2.125k credit 2011.
Lifetime Learning = $1300 total over 2010 and 2011 no matter how you split it.
So if you qualify for the Hope/AOC credit, that looks like it is the way to go.
IANAAccountant, of course.
posted by sararah at 9:39 AM on April 13, 2010
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posted by mr_roboto at 8:12 AM on April 13, 2010