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Tax Benefits for Higher Education

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  • Tax Benefits for Higher Education

    Hi,

    I'm having some confusion about how these would apply to the 2017 tax return, assuming income level requirements are met. Our kids have already used up the American Opportunity Tax Credit and are now in graduate school. I am reading now about the Lifetime Learning Tax Credit (apparently the Tuition and Fees Tax Deduction is no longer available although some websites still list it). My questions would apply to their returns as they are no longer dependents.
    The situation is that they are probably nearing the end of their educations and the strategy has been to empty out their 529 plans as any withdrawal for non-qualified expenses would involve paying taxes plus a penalty. As a result, we haven't looked closely at the available tax credits since I assume that one cannot take a qualified withdrawal from the 529 and also use the same educational expense for a tax credit, but I'm taking a second look at this.
    1. Can someone claim the Lifetime Learning credit in addition to having claimed the American Opportunity credit in previous years?
    2. Looking at the numbers, for $10000 in expenses you can get a $2000 Lifetime Learning credit. If you take the credit instead of doing a 529 withdrawal, then eventually if you take the $10000 out of the 529 for non-qualified expenses it's likely that the tax plus penalty would cost more than the $2000 credit you would get. Am I missing something here? For those of you in similar situations, what was your strategy?

    Any help will be apprecited.

    I didn't find the right solution from the Internet.

    References:
    https://www.bogleheads.org/forum/viewtopic.php?t=242324
    Video marketing service

    Thank you.






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