Sunday, November 8th, 2009

What kind of tax credit/deduction should i take for education expenses ?

tax credit
Krishna asked:


My wife will be graduating from college this spring. She has 20K in debt. She does not work while I work making 70K/year.

Should i try to take advantage of Lifetime tax credit for her ?
I took a Kaplan GMAT (for MBA admissions)class that cost me $1400. Can i deduct that too ?

What advice would you like to give ? Is there any tax advantage of paying off her debt little at a time ?

I appreciate your response.

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2 Responses to “What kind of tax credit/deduction should i take for education expenses ?”

coleblondehead Says:
November 10th, 2009 at 10:59 am

If she hasnt startyed paying on her loan
what you could do is deduct the 1400 class,
any tuition and fees deduction for both
of you or try the lifetime credit see which
way is more beneficial, has she taken the
last 2 for the hope credit.?

mikel0626 Says:
November 11th, 2009 at 7:58 pm

Your wife should have received a 1098-T from the college she is attending for all tuituion and fees paid in 2007.

Generally, the Hope Credit/Lifetime Learning Credit is the most advantagous since it reduces your tax liability dollar for dollar, however you could choose to take the Tuition and Fees deduction instead.

Use Form 8863 to take the credit. Fill out this form using the amounts from the 1098-T your wife received.

You can not deduct or claim a credit for the cost of the GMAT test because that is not considered qualifying tuition and fees at an eligible educational institution. See the instructions for Form 8863 for definitions.

As far as paying off her debt, if the 20K is in the form of student loans, the interest paid each year is deductible ($2,500/yr max) on Line 33 of Form 1040 – Student loan interest deduction.

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