The federal tax code contains several tax credits for college education.Determining which is best is not always easy.This flowchart should simplify your decision between LLC and TDF

1. LLC vsTDF Flow Chart
Expanded Explanations

2. Are your
Qualified
Expenses
more than
$5,000?
Use LLC
Prepare your
taxes through
form 1040 line 43
without using the
Tuition and Fees
Deduction
Is your taxable
income on line 43
greater than:
•$37,450 if single
•$74,900 if MFJ
•$50,200 if HoH
Use LLC
No
Does the amount on line 43 minus:
•$37,450 if single
•$74,900 if MFJ
•$50,200 if HoH
= more than your qualified expenses?
UseTuition and
Fees Deduction
Is your
MAGI over
•$64,000
•$128,000
MFJ?
UseTuition and
Fees Deduction
Yes
Yes
Yes
No
Yes
No
Come see
me!
No
The whole enchilada, but the
next few slides break down
the steps and give an
explanation for each one.

3. Is your
MAGI over
•$64,000
•$128,000
MFJ?
UseTuition and
Fees Deduction
Yes
No
If you are filing single or head of
household the LLC starts to phase
out at $54,000 and is completely
gone by $64,000.
If you are filing MFJ the LLC starts to
phase out at $118,000 and is
completely gone by $128,000.
TheTuition and Fees Deduction is
available t0 $80,000 (single, HoH)
and $160,000 (MFJ).

4. Are your
Qualified
Expenses
more than
$5,000?
Use LLC
Is your
MAGI over
•$64,000
•$128,000
MFJ?
UseTuition and
Fees Deduction
Yes
Yes
No
No
The maximumTuition and Fees Deduction is $1,000.This is based on the
maximum amount of allowable QHEE expenses ($4,000) being taxed at
the highest possible marginal rate (25%)*
The LLC allows QHEE expenses up to $10,000 and gives a credit at 20%.
Therefore, if QHEE expenses are greater than $5,000 then the 20% LLC
credit rate will always exceed the maximum value you can get from
Tuition and Fees Deduction.
*if you are paying a higher marginal rate, you won’t qualify forTuition and Fees Deduction.

5. Are your
Qualified
Expenses
more than
$5,000?
Use LLC
Prepare your
taxes through
form 1040 line 43
without using the
Tuition and Fees
Deduction
Is your taxable
income on line 43
greater than:
•$37,450 if single
•$74,900 if MFJ
•$50,200 if HoH
Use LLC
No
Is your
MAGI over
•$64,000
•$128,000
MFJ?
UseTuition and
Fees Deduction
Yes
Yes
No
Yes
No
If your taxable income is not above these levels,
your income is only being taxed at 15%.This
makes LLC’s 20% tax credit rate more valuable
than the Tuition and Fees Deduction.

6. Are your
Qualified
Expenses
more than
$5,000?
Use LLC
Prepare your
taxes through
form 1040 line 43
without using the
Tuition and Fees
Deduction
Is your taxable
income on line 43
greater than:
•$37,450 if single
•$74,900 if MFJ
•$50,200 if HoH
Use LLC
No
Does the amount on line 43 minus:
•$37,450 if single
•$74,900 if MFJ
•$50,200 if HoH
= more than your qualified expenses?
UseTuition and
Fees Deduction
Is your
MAGI over
•$64,000
•$128,000
MFJ?
UseTuition and
Fees Deduction
Yes
Yes
Yes
No
Yes
No
No This checks to see if all of your
allowable QHEE expenses will be
deducted from the 25% marginal
rate.

7. Does the amount on line 43 minus:
•$37,450 if single
•$74,900 if MFJ
•$50,200 if HoH
= more than your qualified expenses?
This checks to see if all of your
allowable QHEE expenses will be
deducted from the 25% marginal
rate.
Form 1040 Line 43Taxable Income
$37,450 if single
$74,900 if MFJ
$50,200 if HoH-
IsThis Number GreaterThanYour QHEE for the
Year?A little clearer visual
explanation of the math
this box asks for

8. Are your
Qualified
Expenses
more than
$5,000?
Use LLC
Prepare your
taxes through
form 1040 line 43
without using the
Tuition and Fees
Deduction
Is your taxable
income on line 43
greater than:
•$37,450 if single
•$74,900 if MFJ
•$50,200 if HoH
Use LLC
No
Does the amount on line 43 minus:
•$37,450 if single
•$74,900 if MFJ
•$50,200 if HoH
= more than your qualified expenses?
UseTuition and
Fees Deduction
Is your
MAGI over
•$64,000
•$128,000
MFJ?
UseTuition and
Fees Deduction
Yes
Yes
Yes
No
Yes
No
Come see
me!
No
If only part of your QHEE
expenses are deductible at
25% and part at 15%, we need
to do some fancier math than I
want to try to show on a slide!