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Old January 20th, 2002, 08:35 PM   #15
DrHilieWho
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Join Date: Feb 2001
Posts: 244
Wow! Thank you Liam. As always, you are amazing. Here is something interesting I found for everyone with a child in school, either public or private.

http://www.dgncpa.com/PDF%20Files/Ar...20Planning.pdf

Education IRAs Are Now Viable Savings Vehicles

Until now, most commentators were critical of Education IRAs, mainly because of the skimpy $500 annual limit on contributions. Starting next year, you can contribute up to $2,000 annually to an Education IRA. If you have several children (or grandchildren), you can contribute that much to individual accounts set up to benefit each. So, if you have three kids, you can sock away up to $6,000 every year. Account earnings are allowed to build up tax-free and can then be withdrawn tax-free to pay for the account beneficiary's college expenses. Of course, the contributions themselves are nondeductible (just like contributions to Roth IRAs)

Even better, you will be able to take tax-free Education IRA withdrawals to pay for elementary and secondary school (K?12) expenses starting in 2002. Eligible expenses will include tuition and fees to attend private and religious K?12 schools as well as costs to attend public K?12 schools. What kind of expenses can you cover? The rules are pretty liberal. Eligible items include books and supplies; computers, peripheral equipment and software (as long as the program is primarily educational in nature); room and board; school uniforms; transportation; academic tutoring and even Internet access charges. In the case of computers and related equipment, it is okay if other family members use them as long as the Education IRA beneficiary also uses them during any year he or she is in school.

Starting next year, you will also be allowed to take tax-free withdrawals from an Education IRA in the same year the Hope Scholarship or Lifetime Learning tax credit is claimed for the account beneficiary's college expenses. However, the same expenses cannot be used to claim both breaks.

Starting with contributions related to the 2002 tax year, you would have until April 15th of the following year to make your annual Education IRA contributions. This is the same deadline as for traditional and Roth IRA contributions. (Currently, Education IRA contributions must be made by the end of the year to which they relate.)

Finally, the adjusted gross income (AGI) phase-out range that limits Education IRA contributions for high-income taxpayers will be increased to between $190,000 and $220,000 for joint filers for next year. (The current range is between $150,000 and $160,000.) However, the phase-out range for single, head of household and married filing separate status will remain at AGI of $95,000 to $110,000.
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