Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Tuition/529 tax planning
Old 02-03-2020, 10:55 AM   #1
Thinks s/he gets paid by the post
The Cosmic Avenger's Avatar
Join Date: May 2016
Location: Mid-Atlantic
Posts: 2,326
Tuition/529 tax planning

Well, the tuition deduction is pretty much gone under the new tax laws. It certainly is for us, as we (currently, and I hope through the next four years) make enough that we do not qualify for the Lifetime Learning Credit or the American Opportunity Tax Credit (thanks to Gumby for The important "trigger" income levels 2020 thread).

So, while we planned on paying our expected tuition contribution ($30K/yr) straight from our income, I thought I would get tax breaks for it. Now the only thing I can find is that our state (MD) allows a $2.5K/year tax deduction, and you can carry forward any excess for 10 years. So it looks like we should pass our tuition payments through the 529, or at least up to the deduction limit.

I think we can stretch that, though, if we 1) open another 529 in my spouse's name, because it looks like we can each have one for our (only) child, and 2) put in at least $25K in each account in the last year or two to pass through and pay tuition, because having gone through the 529 we can each take a $2.5K state tax deduction per year, or $5K per year, for the next 10 years. The last year we won't be putting in $50K, but we can put in $25K in one account the last (senior) year and another $25K in the other account the year before that (junior).

So we'll have 9 post-college years of $5K state deductions, and the last one will be for $2.5K...mostly because we shouldn't contribute $50K for the last year, we'd wind up with leftover money, so I'll split it between the junior and senior years, one $25K contribution for each account, but a year apart.

Does that make sense? Am I missing anything? Even if you're not in my state, even if it's not tax-related, I'd also be interested in how you optimized the tuition payment process!
-Looking to FIRE in the mid-2020s, which would be our mid-50s.
The Cosmic Avenger is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 02-03-2020, 01:20 PM   #2
Full time employment: Posting here.
Kwirk's Avatar
Join Date: Mar 2006
Posts: 509
Originally Posted by The Cosmic Avenger View Post
Does that make sense? Am I missing anything?
That's what we've done. The state deduction in Va is $4000 per account. We had 6 accounts last year, 2 each for daughter and 2 grandchildren. That's a $24,000 deduction from state income.

At age 70 the deduction is unlimited.
Kwirk is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Pay down the mortgage (fund 529 later) or Fund 529 now? Math problem. bo_knows FIRE and Money 1 05-16-2012 03:24 PM
What does your kid get besides (perhaps) some college tuition? Nords Young Dreamers 35 07-24-2008 01:14 PM
State residency for Armed Forces personnels for in-state college tuition. Sam Other topics 9 07-30-2007 05:06 PM
Predicting college tuition... Xtreme Cowboy Other topics 11 06-16-2007 09:50 AM
Quick Tax Question re Tuition Deduction TromboneAl FIRE and Money 19 01-31-2007 12:22 PM

» Quick Links

All times are GMT -6. The time now is 10:11 PM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2023, vBulletin Solutions, Inc.