1. Education Provisions Other Than IRA Education IRA - See Chapter 8 Qualified Tuition Plans – See also Chapter 4

2. Chapters 5 & 9 – Student Interest Deduction zInterest exp on qualif’d educ loans - tuition, fees, rm & bd zAbove the line deduc zTP, spouse, dependent zAmount: 1000 (98), 1500 (99), 2000 (2000), 2500 (2001 + on) zPhaseout: [Mod AGI - 40,000 (60,000 MFJ)]/15000

3. Student Loan Interest (con’d) zDep of another cannot deduc z98 Law – only pers req’d to pay on loan

4. Student Loan Interest- EGTTRA ‘01 zAfter `01, AGI Phase outs 50-65 (single), 100-130 (MFJ) indexed z60 month limit – Repealed zVoluntary Interest payments allowed

5. Chapter 4 – ER Provided Educ. Assistance Exclusion z $5250 undergrad exclusion extended to before 1/1/02 z Permanently EGTTRA after ’01 z Grad & undergrad after ’01 by EGTRRA

6. Chapter 11 - Hope Credit zHope Credit: Tuition & Rel’d; not - rm, bd, bks; - 100% 1st 1000, 50% next 1000 pd after 12/31/97; TP, SP, Dep - 1st 2 yrs post secondary

7. Chapter 11 - Lifetime Lrng Credit zLifetime Lrng Credit: z20% qualif’d tuit & fees; 5000 exps pd 6/30/98 - 1/1/03; 10000 exps pd after 12/31/02; TP, SP, Dep zBoth credits: phaseout 40-50000 S 80- 100000 MFJ

8. Lifetime Lrng (cont’d) zPrepay (end of yr) - courses beginning 1st 3 mos (next yr) (Reg.) Postpay (after end of yr) - if loan proceeds distributed used directly to elig edu inst b4 yr end (Reg.)

9. Chapter 11 - Hope & Lifetime zDifferences: Lifetime - unlim’d yrs, not vary by # students: Hope does vary by number of students zUG/Grad/Prof: Halftime basis at least, degree or certif; job skills at Elig educ inst (full, half, less half); Both - not include excludable exps zForm 8863

10. Qualified State Tuition Program - CA Conformity Effective 1/1/98 From Spidell’s Personal Income Tax Update (Fall 1998)

11. Reasons to Fund a Scholarshare Program zIncome is deferred for federal & California purposes until withdrawn for qualified education expense zThe college does not have to be designated when the account is open zThe student may attend a community college, state university or private institution, inside or outside of California

12. zIncome is taxed at student’s tax rate rather than donor’s rate – if not used for qualified expense zUnlike the other tax credits, there is no income limit for donors zDonor retains control of the funds zFunds may be used for education of the beneficiary or the beneficiary’s relatives

13. zGrandparent can circumvent parent’s control zContributions to Scholarshare account may be higher than the per beneficiary maximum for an Education IRA zA Scholarshare beneficiary may also be eligible for both the HOPE and the lifetime learning credits

14. Reasons Not to Fund a Scholarshare zSubstantial penalties if withdrawn for nonqualified purposes. zThe donor cannot make investment decisions zThe money is managed by the State zA donor may not contribute to a Scholarshare and an education IRA in the same year

15. Qualified Higher Education Expense Deduction EGTRRA ’01 zAfter ’01 above the line deduction (for AGI) – Tuition & Fees zQualified higher education expenses z2002-2003: 3000 limit and phase out AGI 65 (single) 130 (mfj) z2004-2005: 400 limit and phaseout 65-80 (single) and 130-160 (mfj) can claim 2000