Housing Deposit and Taxes

<p>We paid an $800 housing deposit. $400 has been credited to the first semester bill and the remaining $400 will be credited next semester. When calculating expenses paid for our 529 account and the tax credits do we consider the entire $800 to have been paid by us in 2011? If so, is it to our advantage to pay the 2nd semester bill before 12/31/11 and not wait until January?</p>

<p>I still am hoping for an answer to the above question. Anyone?</p>

<p>Also, as of today the $400 is not showing on his statement. I assume it will be posted around the same time as the federal grant and loan money. Anyone know what date that happens by?</p>

<p>Housing isn't a qualified expense for tax credits, so that isn't an issue.</p>

<p>I am NOT a tax advisor. My personal interpretation for the 529 is that you PAID the entire amount in 2011, so for your 529 it is paid in 2011. The fact that they hold it and haven't credited it to your bill yet doesn't change the fact that you paid it in 2011. Keep documentation of the date of your payment with your tax paperwork.</p>

<p>Thanks alamemom, that makes sense. This is all new to me and I need to read through all the IRS rules. With so much in grants we may not be eligible for any tax credits or deductions, but I think housing is a qualified expense for 529 withdrawls.</p>

<p>Yes, I also interpret the 529 that way. For the tax credits, they only allow tuition and fees that must be paid for the student to attend classes, so that includes tuition and mandatory fees such as lab fees. It does not include the health center fee, tuition insurance, orientation, books, room & board, etc., though all of those (in my opinion) can be paid with 529 proceeds.</p>

<p>If the total in grants and scholarships (but not loans) exceeds the qualified expenses (tuition and mandatory fees), the excess goes on the child's tax return as income. It gets added to the total on line 7, but you also separate out the scholarship/grant amount and put that on the dotted line to the left of the box on line 7 as that amount will not be on the child's W-2, it will be on the 1098T issued by USC.</p>

<p>As confusing as that sounds, once you have all the W-2s, 1098T and tax forms in front of you, it is (at least somewhat) more clear.</p>

<p>USC is very accustomed to dealing with all of this, but I still send in a "please note" email or FAX to be sure they know the student's income on line 7 includes scholarship proceeds. In addition, for students who have excess scholarship, grant or loan proceeds held in a savings or checking account from the current school year when you fill out the FAFSA for the following year, be sure to let USC know (I use the additional info section on the CSS/Profile AND send in a "please note" message) the dollar amount in the account that was financial aid or scholarships for the current year - they will not assess those funds for the following year.</p>