A quick google of "college tuition deduction" turned this up:
The College Tax Breaks Explained (College Planning: Personal Finance) at SmartMoney.com
Quote:
The $4,000 (or $2,000) Deduction
For 2007 you can deduct up to $4,000 of college tuition and fees paid for you, your spouse or any other person claimed as a dependent on your return. This is an "above-the-line" deduction, which means you don't have to itemize in order to take advantage of the break. However, the $4,000 figure is the annual maximum, regardless of how many students may be in your family. The other ground rules are as follows:
· You don't get the full deduction if you are unmarried with modified adjusted gross income above $65,000, or a joint filer with modified AGI above $130,000. However, if your modified AGI is between $65,001 and $80,000 for singles or between $130,001 and $160,000 for joint filers, you are entitled to a reduced deduction of up to $2,000.
· You're completely ineligible if you're married and file separately from your spouse.
· No deduction is allowed on the tax return of any person who can be claimed as a dependent on another's return. So your dependent college-age child can't claim the deduction when your own AGI is too high to qualify. The deduction expired at the end of 2007 but will probably be restored by Congress sometime this year.
· No deduction can be claimed for expenses paid with earnings from a Section 529 plan or withdrawals from a Coverdell Education Savings Account. Also, you can't claim the deduction in the same year you claim the Hope Scholarship or Lifetime Learning tax credit for the same student.
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So as usual, it depends -- will tuition be more than $4k? If your AGI is above $130k, the max deduction is only $2k, and above $160k you lose it completely. Even if you qualify for the deduction, you are screwed if you have two kids in college at the same time, because it doesn't increase with more kids.
Better rerun the numbers with this info -- I suspect the 529 will be a better deal for high income families.