What education tax breaks are available?

Education Tax Incentives Comparison Chart for 2002

  Hope Credit Lifetime Learning Credit Coverdell ESA (1) Withdrawal from Traditional and Roth IRAs (1) Student Loan Interest Qualified Tuition Programs U.S. Gov't Savings Bond Exclusion (1) Educational Assistance Programs Tuition and Fees Deduction
Tax Benefit (2) Nonrefundable Tax Credit Nonrefundable Tax Credit Withdrawals are tax free No 10% early withdrawal penalty AGI Deduction Prepay future tuition or tax-free withdrawals Interest is excludable from income Employer benefits are excludable from income AGI Deduction
2002 Annual Limits Credit up to $1,500 per student; 100% of first $1,000 and 50% of next $1,000 Credit up to $1,000 per family; 20% of up to $5,000 of expenses $2,000 contribution per child under age of 18 and any age special-needs child Amount of qualifying expenses Interest paid deduction of up to $2,500 Amount considered necessary to cover qualified expenses Amount of qualifying expenses Exclude up to $5,250 of benefits Deduction of up to $3,000
Qualifying Expenses Besides Tuition and Required Enrollment Fees (2) None None Books, supplies and equipment, room and board if at least half-time attendance, payments to QTP Books, supplies and equipment; room and board if at least half-time attendance Books, supplies and equipment, room and board, transportation, other necessary expenses Books, supplies and equipment, room and board if at least half-time attendance Payment to QTP; payment to Coverdell ESAs Books supplies, and equipment None
Qualifying Education First two years of undergraduate All Undergraduate and Graduate Levels Elementary, Secondary, Undergraduate and Graduate Levels All Undergraduate and Graduate Levels All Undergraduate and Graduate Levels All Undergraduate and Graduate Levels All Undergraduate and Graduate Levels Undergraduate Level All Undergraduate and Graduate Levels
Other Requirements Can be claimed only for two years; must be enrolled at least half-time in a degree program Available for unlimited number of years for both degree and non-degree programs Contributions are no deductible and must be made by the return due date; may also contribute to QTP See Tab 14 for requirements Must be enrolled at least half-time in a degree program   Applies only to qualified Series EE bonds issued after 1989 or Series I bonds Cannot also claim as education credit Not allowed if expense is allowable under another provision
2002 AGI Phase Out
MFJ
All Others
MFS
 
$82,000 - $102,000
$41,000 - $51,000
$0
 
$82,000 - $102,000
$41,000 - $51,000
$0
 
$190,000-$220,000
$95,000-$110,000
$95,000-$110,000
N/A
 
$100,000-$130,000
$50,000-$65,000
$0
N/A
 
$86,400-$116,400
$57,600-$72,600
$0
N/A
Not allowable if AGI exceeds:
MFJ $130,00
MFS $0
All Others $65,000
 

1)

Any nontaxable withdrawal is limited to the amount of qualifying educational expenses.
2) Qualifying educational expenses must be reduced by any tax-free income. The same educational expenses cannot be used to figuring more than one benefit.