A Return on Your Investment: Education Tax Credits & Deductions
For most, summer vacations have come to an end and school is now back in session. Whether you’ve sent your child off to school for the first time or bid them farewell as they enter into their senior year of college, some of the expenses you’ve gathered preparing them can be written off from your taxes.
Here are a few rules and credits from the IRS that you could take advantage around tax season.
Qualifying Educational Institutions
Schools that typically offer education beyond high school levels are eligible for tax deductions – these include your common vocational or post-secondary schools and accredited colleges or universities. You can confirm your school’s eligibility by asking the administration staff or searching through the U.S. Department of Education database of accreditation.
One Credit Per Student
The IRS imposes a limit of credits you can claim for each college student within your household, and each family can have a different situation. For example, if you’re claiming two or more students, you can’t write-off the same type of credit for both students – each one must be different for each student.
Deductible Expenses
Like many other tax deductions, the more you spend towards education, the more it subtracts from your owed tax amounts – these expenses are typically tuition, fees, and other related costs for qualifying students. Please check with the IRS for eligible expenses before racking up a tab – you might be surprised by which educational costs aren’t tax deductible.
Tuition and Fees Deduction
Deductions can be made during tax filing season for qualified tuition expenses and other related expenses that are paid for your education or the education of a spouse or dependent. No itemization is required for this deduction. Simply claim the deduction as an adjustment to your income when filing IRS Form 1040.
Other education benefits for education expenses include:
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American Opportunity Tax Credit or the Lifetime Learning Credit
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Itemized Business Deduction for Work-Related Education – Take a quick questionnaire to see if your work related educational expenses can be deducted. (https://www.irs.gov/individuals/tax-trails-are-your-work-related-educational-expenses-deductible-10)
If your expenses qualify for both a business expense deduction as well as the tuition and fees deduction, you can only claim one deduction and not both.
Student Loan Interest Deduction
Student loan payments are never fun. But there is some good news if you do have one! Those that are required to make student loan payments can easily make a deduction for these costs each year. The first step is verifying if your loan qualifies for the deduction. A qualified student loan is one that was taken out solely to pay the expenses to attend a qualified institution of higher education. Student Loan Interest is considered to be any interest paid during the year on a qualified student loan, including required and voluntarily prepaid interest payments. Deductions for these loans can either be $2,500 or less or the amount of interest actually paid during the year can be claimed as an adjustment to your income, so no itemization of the deduction is needed.
Filing Extension
Be sure to take advantage of these credit and deductions and don’t forget to visit ExpressExtension.com to e-file a personal tax extension and get six months of extra time to file your income taxes. Download our FREE Express 4868 App for your iOS or Android device – e-file and get approved in minutes without even leaving your study session. Contact us with any questions at 803.514.5155, Monday through Friday from 9 a.m. to 6 p.m. EST or email us at your convenience with [email protected].
