2006 - In “Planning for College Tuition Tax Benefits,”
by Mark E. Riley, Cindy L. Seipel, and P. Larry Tunnell
(January 2006), there is an error in one of the examples
illustrating the tax benefits available to college students.
Example 7 (page 45) should have read as follows:
7. Patty begins junior college in the fall
of 2006, and her tuition is $1,000 per semester. If she
prepays her spring 2007 tuition in 2006, she can claim an
HSC of $1,500 based on her $1,000 of tuition for fall 2006
and her prepaid $1,000 of tuition for spring 2007. If she
does not prepay her tuition, she would be eligible for only
a $1,000 HSC in 2006.
article also should have included updated phase-out ranges
for the credits and deductions mentioned. For 2005, the
AGI phase-out range for the Hope and Lifetime Learning Credits
is from $40,000 to $50,000 ($80,000 to $100,000 for married
taxpayers filing jointly). For 2006, the AGI phase-out range
for the Hope and Lifetime Learning Credits is from $45,000
to $55,000 ($90,000 to $110,000 for married taxpayers filing
jointly). The phase-out range for the Higher Education Expense
Deduction remains unchanged for 2005 (see Example 4 in the
article). In 2006 there will be no HEED allowed.
Students Affected by Hurricane Katrina
has increased tax benefits for students attending undergraduate
or graduate institutions in the Gulf Opportunity Zone (the
presidentially determined Hurricane Katrina core disaster
area). The Gulf Opportunity Zone Act of 2005 doubles the
maximum available Hope Credit to $3,000, and doubles the
Lifetime Learning Credit percentage from 20% to 40%, for
a maximum Lifetime Learning Credit of $4,000. The higher
amounts apply only for the 2005 and 2006 tax years. Room
and board, books and fees are also treated as qualified
expenses for students in the Gulf Opportunity Zone.