Education Tax Incentives

IRC Sec.	25A	25A	530	221	529	135	222
Modified AGI phase-out range:
2001
Married joint	$80,000/100,000	$80,000/100,000	$150,000/160,000	$60,000/75,000	N/A	$83,650/113,650	N/A
Single and HOH	40,000/50,000	40,000 /50,000	95,000/110,000	40,000/55,000	N/A	55,750/70,750	N/A
Married separate	0	0	95,000/110,000	0	N/A	0	N/A
2002
Married joint	$80,000/100,000e	$80,000/100,000e	$190,000/220/000	$100,000/130,000	N/A	TBA(d)	$130,000a
Single and HOH	40,000/50,000e	40,000/50,000e	95,000/110,000	50,000/65,000	N/A	TBA(d)	65,000a
Married separate	0	0	95,000/110,000	0	N/A	0	0
Tax benefit	Tax credit	Tax credit	Tax-free education savings	Above-the-line interest deduction	Before 2002: Tax deferred college savings After 2001: Tax-free college savings	Interest Income Not Taxable	Above-the-line tuition deduction
Annual limit	$1,500 per student (e)	$1,000 per return	Total contributions for a beneficiary cannot exceed $500 for 2001, $2,000 for 2002	$2,500	Total contributions per beneficiary determined by QSTP	Amount of qualifying expenses	2001: N/A 2002 $ 3,000
Qualifying education expenses	Tuition & fees Books(b)	Tuition & fees Books(b)	Tuition & fees Books Room & boardc QSTP contribution Computer (2002)	Tuition & fees Books Room & board Transportation	Tuition & fees Books Room & board (c)	Tuition & fees QSTP contribution Education IRA contribution	Tuition & fees
Qualifying education	First two years of undergraduate	Undergraduate and graduate	Undergraduate and graduate; also grades K–12 beginning in 2002	Undergraduate and graduate	Undergraduate and graduate	Undergraduate and graduate	Undergraduate and graduate
Degree program required	Yes	No	No	Yes	No	No	No
More than half time attendance required	Yes	No	No	Yes	No	No	No
Other conditions	Cannot claim if Lifetime Learning Credit is claimed for same student Before 2002, cannot claim in year of nontaxable Education IRA distribution Can claim in year of QSTP distribution Student can claim credit even if dependent	Cannot claim if Hope Scholarship Credit is claimed for same student Before 2002, cannot claim in year of nontaxable Education IRA distribution Can claim in year of QSTP distribution Student can claim credit even if dependent	Before 2002, cannot contribute in year QSTP contribution is made for same beneficiary Before 2002, cannot claim education credits in year of nontaxable distribution from Education IRA	Before 2002, applies only to first 60 months of required interest Student cannot claim deduction if a dependent	Before 2002, beneficiary taxed on earnings when withdrawn Account owner retains control over beneficiary designation and can reclaim funds Before 2002, cannot contribute to Education IRA and QSTP in same year.	Applies only to bonds issued after 1989 or Series I bonds Bonds cannot be owned by student	Deduction not allowed in year education credit claimed with respect to same student. Student cannot claim deduction if a dependent cannot claim deduction for expenses paid with excludable income Restriction on tuition prepayments

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Web designed and authored by Jerry E. Bartram, CPA Last Updated 02/08/08

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