I spent roughly 6000 on education in 2006 through a 529 plan w/ only 5hrs at a time what method do u suggest?

Question

I'm not sure whether to do a deducation or a credit. I'm thinking a deduction since I don't owe.

Answer 1

If you are saying that you paid for your education exclusively with proceeds from your 529 plan, then no matter what your income credits that apply for education. If there is one rule that the IRS or refund, you can not take advantage of any of the deductions or never waivers from, it is "you can't double dip". You can't get a credit on money you earn that isn't taxable. If, however, your educational expenses exceeded the amount which was taken from the 529 plan, then the overage can be used for one of the deductions or credits.

If you did your taxes without taking into consideration any educational deductions/credits and found that your tax liability is already zero, then adding the deductions or credits will not help (unless you can convert some Child Tax Credits (line 53) to Add'l Child Tax Credits (line 68). If line 53 is zero, this doesn't apply to you).

If all of this is beyond you knowledge, you may be best advised to see a tax professional this year. I don't want to see you missing out on tax advantages.

Answer 2

If you don't owe taxes with or without the credit or deduction, then neither the credit nor deduction will benefit you.

The deduction will reduce your income, which is already low enough to cause you to owe no tax.

The credit reduces tax you owe, and you owe no tax to reduce.

If you end up needing a small deduction to get your tax to zero, take the tuition and fees deduction but only up to the amount of your 529 contribution or $4,000 whichever is less. You can't deduct any earnings from the 529 since they are tax-free already.

See Publication 970 Tax Benefits for Education for examples.

http://www.irs.gov/publications/p970/ch06.html#d0e5870

Answer 3

If you don't owe, an additional deduction won't do anything for you either.