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Posted by Herb Smith on April 27, 2008, 5:56 am
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> This question is about tax year 2007. �I incurred $1800 in tuition expense
> for my children, and I am eligible to record this expense on line 34 of my
> 1040 as an adjustment to my income. �I am not eligible to claim the tuition
> tax credits on line 49.
>
> I also cashed in an EE savings bond in 2007 and earned approximately $3000
> in interest. �Under the terms of the bond, I am allowed to exclude from the
> $3000 any portion used to pay qualified educational expenses. �The $1800 in
> tuition expense I incurred would qualify for this exclusion.
>
> So my question is this. �Should I record the $1800 in tuition expense on
> line 34 of my 1040 as an income adjustment and report the full amount of the
> interest earned on the bond ($3000) on my schedule B and include it in my
> total interest income on line 8a? �Or would it be better to apply the
> tuition expense against the $3000 in interest income and reduce my interest
> expense on the bond to $1200, and not fill out line 34. �Or can I do both?
You can do one or the other, but not both. The tax effect (reduction
of taxable income) is the same for either option. Your choice.
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