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The 130k payment to tuition is fully deductable (around 32k deducted from income each year).
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Sorry, this doesn't work. The most you can deduct from income for college education is $4,000/year, and I think that is a temporary item (it may get renewed, who knows). The other options are the hope (max of 1650/student/year) or lifetime learning credits (max of 2000/return). So, with your example, I am thinking the 529 looks more tax advantageous.