Here's a broad brush estimate of where you are given the data you've provided.Gross income
Qualified plan contributions - $4,700Adjusted gross income
- $5,950Personal exemptions
- $3,800Taxable income
= $29,550Tax liability
before credits $3,998Child
tax credits - $0Estimated
tax liability = $3,998
Of course, your withholding
or estimated payments would offset the tax
The waiver of the 10% penalty for higher education WOULD apply, but it would be atypical for a qualified plan administrator to CONVERT part of a loan to a withdrawal.
You may want to consider pulling the money from the IRA and have the custodian code the distribution
as for higher education (this will waive the 10% penalty there) and then use that to pay down the loan.... because if you leave your employer the loan will most certainly be coded as a distribution.
Now, on the IRA distribution, review the 1099 your IRA custodian sends you. You should receive this in late January or early February from your IRA custodian. IRS Form 1099-R
details all IRA distributions you took during the tax year. Check to see that your custodian properly reported your distributions to the IRS. For example, Box 7 should include the number "2," which, as of November 2010, indicates an early IRA withdrawal that is exempt
from the 10-percent tax penalty.
In terms of the education credit
, yes you should qualify for the lifetime learning credit:
The Lifetime Learning Credit is a tax credit for any person who takes college classes. It provides a tax credit of 20% of tuition expenses, with a maximum of $2,000 in tax credits on the first $10,000 of college tuition expenses.
You can claim the Lifetime Learning Credit on your tax return
if you, your spouse, or your dependents are enrolled at an eligible educational institution and you were responsible for paying college expenses.
Unlike the American Opportunity credit, you need not be in the first four years of undergraduate classes. Even if you took only one class, you may take advantage of the Lifetime Learning Credit.
And here's the IRS guidance:
Hope this helps.