The Cosmic Avenger
Thinks s/he gets paid by the post
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!
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!
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