Correction

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FEBRUARY 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:

Example 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.

Update: Phase-outs

The 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.

Update: Students Affected by Hurricane Katrina

Congress 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



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