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Do
you have a child in college? Are
you preparing to send your child to his/her first year in college?
If so, there are several tax savings available to you depending on
how much adjusted gross income (AGI) you have.
Student loan interest is deductible if the loan if for qualified
higher education expenses. The
maximum deduction is $2,500 and that amount begins to phase out when AGI is
over $50,000 or $100,000 married filing jointly.
Tuition
and related expenses get an “above the line” deduction for attendance at
an accredited post-secondary institution.
The maximum deduction is $4,000 for 2004 and is available if modified
adjusted gross income is less than $65,000 or $130,000 married filing
jointly. This deduction depends
on if any of the expenses were used to claim one of the tax credits below.
The
Hope credit is available for the first two years of post-secondary
education. The maximum allowed
is $1,500 per student per year. The
income phase outs for 2004 begin at $42,000 and ends at $52,000 for singles
and begins at $85,000 and ends at $105,000 for married filing jointly.
The
Lifetime Learning credit is allowed for any year the Hope credit is not
claimed. The maximum is $2,000
and is calculated at 20% of qualified tuition expenses up to a maximum of
$10,000. The maximum of $2,000
per year is allowed per taxpayer, regardless of the number of students in
the family. The income phase out
limitations are the same as the Hope credit limitations.
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