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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 14868
Experience:  15years with H & R Block. Divisional leader, Instructor
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Im ***** *****. Random question regarding the education tax

Customer Question

Hi im ***** *****. Random question regarding the education tax benefits I get from going to college. Currently I pay the majority of my college expense through a 529 joint fund which has both my name and my grandmothers name listed on it. I take the money from there and place it into my normal bank account, and then pay it through a e-check which is only listed in my name. My parents are divorced and my father can claim me on his taxes. He has been telling me i may receive a college tax credit for paying for my schooling, while my mother is hesitant about it because the majority of the money spend is through the 529 fund my grandmother set up for me which is listed in both our names. I am wondering if I can still receive the tax benefits from this. thank you!
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Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.

Hello

First there is no tax is due on a distribution from a 529 plan unless the amount distributed is greater than the beneficiary's adjusted qualified education expenses.

An American opportunity or lifetime learning credit (education credit) can be claimed in the same year the beneficiary takes a tax-free distribution from a 529, as long as the same expenses aren't used for both benefits.

This means that after the beneficiary reduces qualified education expenses by tax-free educational assistance, he or she must further reduce them by the expenses taken into account in determining the credit.

To shorten the answer, if you had $5000 in tuition and the 529 money paid for all of it NO CREDIT. If you had $5000 in tuition and the 529 money paid for $1000 then you could use the other $4000 for education credit.

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Customer: replied 1 year ago.
I am still a bit confused. Lets say hypothetically my tuition/all college expenses total to be 10,000 dollars. I get a Federal Direct Sub Stafford 2,000 and a Federal Direct UnSub Stafford 1000, and the rest (besides a few books) I pay for with money from the 529. Would there be any way for me to get that tax break?
Expert:  Robin D. replied 1 year ago.

The amount you pay with the 529 is not going to be allowed for the credit too.

If the Staffords you site above are for loans then those amount are allowed. Federal Direct Sub Stafford 2,000 and a Federal Direct UnSub Stafford 1000 would be the only amounts you could use to claim education credits.

Expert:  Robin D. replied 1 year ago.

I hope that helps

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Customer: replied 1 year ago.
Federal Direct Sub Stafford 2,000 and a Federal Direct UnSub Stafford 1000 would be the only amounts you could use to claim education credits."
How much would you estimate the tax credit to be on these because they are loans.
Expert:  Robin D. replied 1 year ago.

It does not matter that they are loans. That is money you paid yourself. The maximum annual credit of $2,500 per student is allowed.

The credit is claimed by you or if you are still a dependent by your parent.

It is based on income. so if you made less than $80,000 , or $160,000 or less for married couples filing a joint return the full $2500 is allowed.

I know rating takes an additional step and I truly appreciate it when you take the extra time!
When you actively click on a rating and click submit, that lets Just Answer know you were assisted and credits me for the time.