tuition deduction/credit and 529

Did he or you pay all of the college costs with the 529 plan? Does he plan to file his own tax return or will he be a dependent on your return?

Note that a taxpayer can take either the AOC, lifetime learning credit, or tuition and fees deduction. They all yield different reductions in the net tax. But one can only take these for amounts paid out of pocket, and not from a 529 plan. Also there is a rule that anything paid by you or by your dependent out of pocket can be considered to be paid by him or you: if he files his own tax return then the amounts paid will be considered paid by him even if you paid it, so that he can take the AOC or lifetime learning credit. I don't know if this transferrability applies to the tuition and fees deduction, but his income is likely very small and possibly zero so this deduction is not likely to be worth much anyway.

I will pay $4k directly toward the college expenses. The 529 has not be used until this last fall - paid out $11k

Our TurboTax for last year's filing chose the AOC.

So, for this year year, for 2012 taxes, I was again looking at the $4k expense on the 8863 for the AOC.

Then, for his 1040 return, see how TurbotTax handles the 529 payout for the first time.

He has filed for several years, since his Schwab account yields divs..

BTW - what are the issues involved, if any, for going beyond the usual 4yrs of college, with regard to any of the IRS tax, deductions, & credit issues ?

Also - anything related to withdrawals from the 529 plan ?

The American Opportunity Credit (AOC) can only be used for 4 tax years for any one student. Any years that you used the Hope Credit for your son count against the 4-year limit for the AOC.

There is no limit on the number of years that the Lifetime Learning Credit and the Tuition and Fees Deduction can be used. However, as of now, the Tuition and Fees Deduction expires at the end of 2013. There is no guarantee that it would be extended beyond that.

Bob Sandler