FP 511- General Fin Planning- module 8

Question 1

2 major education tax credits

Answer 1

American Opportunity Tax Credit and

Lifetime Learning Credit

Question 2

American Opportunity tax credit

Answer 2

Up to $2,500 up to 4 years of postsecondary education (must be getting undergrad degree or other credential)
Student must be enrolled 1/2 time
100% of 1st $2,000
25% of next $2,000
Room & Board excluded
MAGI exclusions %80-90k indiv or $160-$180k married

Question 3

Lifetime Learning Credit

Answer 3

Max $2k per family
Avail all years of postsecondary education
Does NOT need to be pursing undergrad degree
Felony drug conviction doesn’t apply
MAGI phaseouts $58-$60k indiv or $116-$136k family

Question 4

If 2 or more children in same house incur qual education exp’s in same year, what can happen?

Answer 4

Parents may claim:

• a Lifetime Learning Credit for the fam
• an American Opp Tax Credit for each elig child
• OR-
• a Lifetime Learning Credit may be claimed for one child and an American Opp Tax Credit may be claimed for each of the other elig children.

Question 5

Can a taxpayer claim an American Opportunity Tax Credit or Lifetime Learning Credit for taxable year and also exclude from gross income amounts distributed from a 529 or CESA plan?

Answer 5

Yes but only if they are not used to pay for the same expenses.

Question 6

Can the American Opportunity Tax Credit and Lifetime Learning Credit be claimed in the same year for the same student?

Answer 6

No

Question 7

Student Loan Interest Deduction

Answer 7

Allows student or parent (for PLUS loans) to deduct interest paid on educational loans up to a max of $2,500/ year as an adjustment to reach AGI- ($70-$85k indiv or $140-$170k mfj). Can deduct over life of loan.

Question 8

Can student loan interest deduction be used in conjunction with other tax benefits?

Answer 8

Yes

Question 9

How much educational assistance can an employer offer that is job related?

Answer 9

Unlimited amount of assistance under IRC section 162

Question 10

How much educational assistance can an employer offer that is NON job related?

Answer 10

Up to $5,250 during any one year as a tax free ee benefit under IRC section 127.

Question 11

EFC caluculation

Answer 11

(22-47% of parent income + 5-5.64% parent assets)
PLUS
(50% of student income +20% of student assets)

Looks back at 2 years of parent income- taxable and non taxable
Excluded parental assets: home equity, cars for reg transportation, cash value of life ins policy, retirement plans.
First $6,600 of Student income is not included in calc

Question 12

EE & I Savings Bonds

Answer 12

Permits qualified taxpayers to exclude from their gross income all or a portion of interest earned on redemption of elig EE and I bonds (issued after 1989).

Bondholder must be at least 24 when bond is purchased and the taxpayer, taxpayer spouse or taxpayer’s dependent must incur tuition & other educ exp’s.

Phaseout restriction applies: ($81-$96k indiv or $121-$151k mfj for 2019).

Can be converted tax free to Section 529 plans (but there are income restrictions).

Elig ex’s incl tuition & fees

Room & board or books are not eligible

Child can be named as benef but cannot be co-owner. Only elig owners are purchaser/ taxpayer & taxpayer spouse