The amount of qualified higher education expenses
to which QTP distributions may be applied is reduced by the amount of such expenses that were taken into account in determining the HOPE and Lifetime Learning credits allowed under section 25A of the Code.
Section 529(c)(6) imposes a 10 percent penalty on the income portion of any distributions in excess of qualified higher education expenses
computed using the annuity exclusion ratio.
The 10 percent penalty is not paid if the withdrawals from the traditional IRA and Roth IRA are for qualified higher education expenses
, but a 10 percent penalty tax does apply to amounts distributed above the qualified educational expenses.
A qualified education loan is any indebtedness incurred solely to pay for the qualified higher education expenses
of the taxpayer, the taxpayer's spouse, or any dependent of the taxpayer as of the time the indebtedness was incurred in attending (1) an eligible education institution (generally a college, university, postsecondary educational institution, or certain vocational schools eligible to participate in the student aid programs of the Department of Education, including virtually all accredited public, nonprofit, or proprietary postsecondary institutions); or (2) an institution conducting internship or residency programs leading to a degree or certificate from an institution of higher education, a hospital, or a health care facility conducting postgraduate training (Sec.
The new law permits taxpayers a non-itemized deduction for qualified higher education expenses
, as defined for the HOPE Credit.
Distributions from an education IRA may be made to cover qualified higher education expenses
for the designated beneficiary.
Contributions may be used to pay for qualified higher education expenses
, such as tuition, certain room and board costs, books, and required equipment.
IRC section 529 qualified tuition programs have become more popular due to Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) provisions that ended the taxing of distributions used to pay qualified higher education expenses
The qualified educational loan is any indebtedness incurred to pay for qualified higher education expenses
of the taxpayer, spouse, or dependent at the time indebtedness occurred.
The MFESP, Montana's state-sponsored 529 plan, offers Montana residents a tax-advantaged college savings vehicle that includes tax-free earnings, tax-free withdrawals when distributions are used to pay qualified higher education expenses
, and a state income tax deduction to gross income per taxpayer, up to $6,000 for those filing jointly, based on contributions to the Program.
221(d) defines this as a loan obtained to refinance other qualified education loans or to pay qualified higher education expenses
(QHEEs) for an eligible student at an eligible educational institution.
The most important change to QTPs provides a complete exemption from gross income for distributions made after December 31, 2001 used to pay for qualified higher education expenses