Can any one tell me which one will give me more money on my income tax return? I am a college student who is in need of a substantial tax return to pay of some debt and books for school.
2007-01-05 05:02:31 · 3 answers · asked by ? 2 in Business & Finance ➔ Taxes ➔ United States
There's actually 3 TAX deals this year, the last of which isn't in the tax forms because it passed as law in December!
The answer is..."it depends"
On the first assumption that YOU are eligible for the credits in the first place (I'll get back to this in a minute), the HOPE credit is for your first 2 years of a degree program and can only be claimed for 2 tax years in total. (typically, freshman year starts in fall, so freshman and sophomore years cover 3 tax years, but you can only use the HOPE credit for 2 tax years).
HOPE credit = 100% of first $1100 in tuition plus 50% of next $1100. Max credit = $1650
LLC Credit is 20% of the tuition UP TO $10,000. (Certain rules covering hurrican victims can boost this amount.). So, if you don't qulaify for HOPE, you may still qualify for LLC. Also, you may wish to use LLC instead of HOPE if tuition exceeded $8250 in the year.
The third option is the Tuition deduction, which is limited to $2000 or $4000 depending on your income. This is a DEDUCTION, meaning that if you are in the 15% bracket, you save only 15% of the amount you can deduct. The other two HOPE & LLC, are creidts, meaning you save a dollar for every dollar of credit. Neither deductions nor these credits are refundable so that can't take your tax below zero.
Finally, YOU may not be the one to benefit from ANY of these credits or deductions. If you are a DEPENDENT of your parents, THEY May get the deductions or credits (and it may be beneficial to do it that way!)
See your tax advisor, and speak with your parents, BEFORE you cheat yourself from some big benefits.
The WealthBuilder
Enrolled Agent / Tax Specialist
2007-01-05 05:45:59 · answer #1 · answered by WealthBuilder 4 · 0⤊ 0⤋
At larger tuition amounts ($8000+), the Lifetime Learning credit is better. At amounts, less than that, the Hope Credit is better.
2007-01-05 05:40:48 · answer #2 · answered by Wayne Z 7 · 0⤊ 0⤋
Lifetime is better if you have large bill upto 10,000. But for small bills like $1-$2K hope is better. If it's more than $10K deduct the difference in tuition and fees. This is adjustment for AGI. It all depends on your situation. There is no clean cut
2007-01-05 07:27:40 · answer #3 · answered by alikmal 2 · 0⤊ 0⤋