Hi All,
I read posts regularly, and I’m grateful to everyone that has taught me so much. An aid package arrived that looks like its within our means. We’re super excited. I’ve sent a request to the admission contacts to review some basic questions with my Kid1, and then we’ll set up a spreadsheet. I want to make sure I use the tax credit AOTC for QEE in the fall of 2018 and in spring 2019 move onto the 529 plan. I know the QEE is different for each. Is it best to take the aid package, break everything into 1/3 (its a trimester system), determine how the university applies the aid to tuition, fees, room, and board for each trimester and then determine from what source we’ll pay the balance due? I’m not even sure how the federal loans and grants work, I assume they are paid in increments based on the semester/trimester. I’m interested in the thought process used to create the “game plan” for payments. Once I do that, then I will look across 4 years with increases, as Kid2 is 1 year behind Kid1, and that’s when it really gets fun.
The tricky part is to know when the school is going to bill expenses and apply aid.
My D’s school used to bill in July and November and apply aid in August and December. So we had everything for the year on one 1098T.
For 2017 they changed that, and we have two semesters of charges and one semester of aid on the 1098T because spring aid wasn’t applied until January.
Yes, if you qualify for AOTC otherwise, you should try to pay $4,000 of qualified education expenses to claim for AOTC in 2018.
It’s important to remember that for the education tax credits, the timing of qualified payments is critical. If you pay for spring 2019 in December 2018, you can use that payment for an education tax credit on your 2018 tax return, but not on your 2019 tax return.
With payment from a 529 account, timing is also important. Qualified expenses that are being paid with or reimbursed by money from a 529 account must be paid in the same tax year that corresponding 529 withdrawals are made. Don’t take the money from the 529 for spring expenses in December, and then write the check in January. Likewise, don’t pay for spring semester out-of-pocket in December, and then take a 529 withdrawal in January to reimburse yourself for that expense.