If your Child has Opted to Study Abroad, 529 Plan Distributions May Still Qualify to be Used for Foreign Educational Expenses

Several hundred foreign educational institutions qualify to use 529 plan distributions.  Parents and students can check the link provided by the savingforcollege.com website to determine if a student’s foreign (and US) educational institution qualify for the 529 funds to be used for education costs:

Federal School Code Lookup for Section 529 Eligible Institutions (savingforcollege.com)

Education tax credits available to taxpayers.  Depending on your income, you may qualify for either the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit (LLC).

AOTC summarized:

1. The maximum tax credit is $2,500 per student per year.
2. Qualified expenses include tuition and fees; plus books, supplies, and equipment required for enrollment.
3. The first four years of undergraduate education qualify for the AOTC.
4. The student must be enrolled at least half-time in a degree or certificate program.
5. Not available for MFJ filers with income greater than $180K and other filers with income greater than $90K (a phase-out begins at income levels of $160K/$80K).  MFS filers do not qualify.
6. A portion of the tax credit can be shifted to the student (subject to specific rules) to claim if the parents’ income exceeds the threshold amount noted in item 5 above and the student has income resulting in federal income tax.

LLC summarized:

1. The maximum tax credit is $2,000 per tax return per year.
2. Qualified expenses include tuition and fees; plus books, supplies, and equipment required for enrollment.
3. An unlimited number of years for both undergraduate and graduate education qualify for the LLC.
4. Degree and non-degree programs qualify for the LLC.
5. Not available for MFJ filers with income greater than $180K and other filers with income greater than $90K (a phase-out begins at income levels of $160K/$80K).  MFS filers do not qualify.
6. A portion of the tax credit can be shifted to the student (subject to specific rules) to claim if the parents’ income exceeds the threshold amount noted in item 5 above and the student has income resulting in federal income tax.