[jIM_Ohio]

I am looking at what tax benefits exist for education. Both HS and college tuition.

Here's my premise-

I am thinking that the tax deductions for paying college tuition (the year of the payment) are better than any of the other options. My understanding is tuition is fully tax deductable. If it's not, this whole premise is invalid.

529- money is put in post tax, compounding is tax free, withdraws are tax free for education needs. No tax deduction on the tuition paid.

Taxable account- put in money post tax, compounding is taxed, pay taxes at capital gains rates when investment is cashed in. The payment for tuition is fully tax deductable.

The math:

Put 3600 per year into 529. $66100 is cost basis. Grows to 130k in about 16 years (100% return). Withdraw most of 130k for tuition and paid only $13500 in taxes to do this.

Put 3600 per year into taxable account. Grows to 130k in about 16 years. Fund I am thinking of pays around .10 per share per year in dividends (90 taxes year 1, goes up to 3k in taxes just prior to year of withdraw). Total taxes paid are $22k in dividends, plus $13500 in income taxes, plus $9600 in capital gains taxes. 44k in taxes paid.

The 130k payment to tuition is fully deductable (around 32k deducted from income each year). So ultimately I get the 44k in taxes paid back, plus another 90k in taxes back at a time in life when deductions go away.

Thoughts?

Not sure what the hope credit is, not sure of other education deductions. Comments?