School started only a few weeks ago. By now, parents and students have spent what seems like zillions of dollars on supplies, tuition, and books. Sure, all that spending is an investment in the future. But is there a way to see some return on all that spending before graduation?
Qualified educational expenses could be eligible for income tax deductions or credits. That could mean hundreds or thousands of dollars back in your tax refund next year. Just how much you can claim depends on your situation. Here’s how it works:
- Education Credits
Qualified education expenses paid by or on behalf of an eligible student to an eligible school for higher education could be claimed as a dollar-for-dollar credit against your tax liability. That’s a lot of “qualifieds” and “eligibles” but it’s worth checking out. There are two education credits: the American opportunity tax credit and the lifetime learning credit. If you’re eligible to claim both credits for the same student in the same year, you can only choose one.
- Tuition and Fees Deduction
Qualified higher education expenses paid during the year for yourself, your spouse or your dependent could be tax deductible. If it produces a lower tax liability, you may be able to take one of the education credits for your education expenses instead of a tuition and fees deduction. Remember, no claiming the tuition and fees deduction and an education credit for the same expense.
- Business Deduction for Education Expenses
Employees who itemize deductions (i.e., Schedule A) may be able to deduct expenses paid for work-related education. Work-related education expenses may also qualify for one of the credits described above. Self-employed individuals can deduct work-related education directly from self-employment income, reducing both income tax and self-employment tax.
- Qualified Student Loan Interest Deduction
Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. However, if you qualify based on your income and filing status, there is a special deduction allowed for paying interest on a student loan used for higher education. This deduction can reduce your taxable income subject by up to $2,500.
Paying education expenses can take a bite out of your budget. Check out the IRS website at http://bit.ly/2hhlQxs to see if you qualify to get some of that money back in your tax refund next year.