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Chapter 9. IRAs Versus 401(k)s—Which Is ... > Things to Consider for 2002 - Pg. 94

IRAs Versus 401(k)s--Which Is Better? 94 If Ed IRAs and Section 529 plans aren't enough, EGTRRA 2001 also provides a tax deduction for college tuition and a deduction for student loan interest. So, if you're considering using your home equity to pay college expenses, the double deduction could produce a very inexpensive loan. If you're still considering using your 401(k), consider maxing out your pre-tax contributions and saving for the kids' education using the after-tax feature. You may be better off withdrawing the after-tax money than repaying a loan. You might also consider a Roth IRA for the kids' education because you can withdraw just your contributions and pay no taxes. But, given enough time, and if your partner saves as well, you can amass a sizable amount of money. Terms to Know Hope and Lifetime Learning Credits:Get credit, tax that is, for those education expenses you incur. In 2002, you can claim up to $1,500 in Hope credits for your first two years in college and up to $2,000 in Lifetime credits each year, thereafter. Lifetime credits can be used for undergraduate or graduate schools, but you can't claim Hope and Life-time at the same time. To get "credit" you have to qualify, and the biggest qualifier is Adjusted Gross Income, $40,000 if single and $80,000 if married.