Benefit From Your 529 Plan and the American Opportunity Tax Credit in the Same Year
If you plan carefully, you can double up on these ways to cover college costs.
![College student thoughtful in study room](https://cdn.mos.cms.futurecdn.net/FUHhu3x4pvpxgSZVAxkUyF-415-80.jpg)
Can I use 529 money to pay college tuition and also claim the American Opportunity tax credit in the same year? --R.H., Paintsville, Ky.
Yes, if you plan carefully. The American Opportunity credit can be worth up to $2,500 per student for each of the first four years of college. It is calculated as 100% of the first $2,000 in eligible expenses (tuition and fees) for each student, plus 25% of the next $2,000. You can’t double-dip tax breaks—that is, claim the credit for the same expenses you paid with tax-free money from your 529 plan—so it’s best to pay at least $4,000 of tuition charges from money outside of your 529. Then you can use the 529 money tax-free for the remaining tuition and fees, plus other eligible expenses, such as room and board, books, and a computer and Internet access.
![https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png](https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-320-80.png)
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.
-
Confused by Annuities? Making Sense of the Different Types
Many investors aren't sure if annuities are a good option for meeting financial goals. Let's look at the different categories, along with their pros and cons.
By Kris Maksimovich, AIF®, CRPC®, CPFA®, CRC® Published
-
Talkin' 'Bout My Generational Wealth: Baby Boomers
With retirement, each generation has different priorities and challenges. For Baby Boomers, it's a matter of ready or not, here it comes.
By Alvina Lo Published
-
$145 Million in ‘Senior Freeze’ Checks Mailed
Property Tax What you need to know about New Jersey's property tax relief program for older adults.
By Kate Schubel Published
-
An IRA Contribution Option You Might Not Know
IRAs Retirement savings might not have to take a back seat just because your partner doesn't earn income.
By Kelley R. Taylor Last updated
-
HSA Contribution Limit Rising Again for 2025
Health Savings Contribution limits matter when it comes to maximizing your tax-advantaged health savings account.
By Kelley R. Taylor Last updated
-
Final EV Tax Credit Rules Don’t Change Much for Consumers
Tax Credits Treasury and IRS have finalized regulations for the up to $7,500 electric vehicle tax credit.
By Kelley R. Taylor Last updated
-
Three 'Hidden Costs' of Health Savings Accounts (HSAs)
Health Savings HSAs offer valuable tax benefits, but can 'hidden costs' erode those advantages?
By Kelley R. Taylor Last updated
-
How the Biden Marijuana Shift Could Impact Taxes
Tax Rules A pending Biden administration marijuana rule change could help some businesses lower their taxes.
By Kelley R. Taylor Last updated
-
Georgia Has a New 2024 Income Tax Rate
Tax Cuts Georgians now have a tax package containing income tax cuts, childcare relief, and potential property tax caps.
By Kelley R. Taylor Last updated
-
A Bunch of IRS Tax Deductions and Credits You Need to Know
Tax Breaks Lowering your taxable income is the key to paying less to the IRS. Several federal tax credits and deductions can help.
By Kelley R. Taylor Last updated