I have a question on the AOTC tax benefit. Our sons will go to college in 2 years and we were looking at putting money into a 529 plan. We don't have much to save but if I am interpreting things correctly, it would benefit us more to put $2,500 aside a year and use that later to take the AOTC tax write off then to put $2,500 into a 529 now. Our state tax savings this year would only be $90 if we put $2,500 in a 529. I don't believe the 529 would increase much in the next 2 years. The most we would pay towards their tuition is the $2,500 a year, per child. We have 2 starting in 2 years, 1 in 4 and 1 in 6.
Am I understanding this correctly? I am concerned as I don't see this addressed in any of the 529 articles I read. It also seems strange that we can't use the money we put into the 529 (not the increase) for a federal AOTC tax write off as there is no federal tax savings when you initially put the money in the 529.
Thanks for your input.