New Ways to Save for College The 1997 tax legislation contains the following education-financing incentives: EDUCATION IRA: -- Lets single people earning up to $95,000 (joint filers, $150,000) put away $500 per year per child, starting in 1998 -- Contributions must end once student hits age 18; money must be distributed before beneficiary reaches 30 -- Withdrawals are tax-free for college tuition, housing -- Parents can get around income limit by having other qualifying adults, such as grandparents, set up the account ROTH IRA: -- Parents can sock away up to $2,000 each in nondeductible contributions -- Same income limits as Education IRA -- After five years, the principal only can be withdrawn tax-free for education LIFETIME LEARNING CREDIT: -- Allows a maximum tax credit of up to 20% of $5,000 ($10,000 beginning in 2003) for tuition and fees -- Qualifying income caps are $40,000 for singles, $80,000 for joint filers -- Can be applied to professional seminars and adult-ed courses, too. -- May not be claimed in the same year as a Hope Scholarship HOPE SCHOLARSHIP: -- Gives a tax credit of up to $1,500 a year for the first two years of college -- Same income limits as Lifetime Learning Credit -- Children with high-income parents can use the tax credit themselves if they're not declared dependents DATA: BUSINESS WEEK Return to main story

Updated Oct. 30, 1997 by bwwebmaster
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