Back-to-School Savings: Tax Tips for Parents and Students

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I can’t believe how quickly summer has gone. School is starting up in our area and I just saw on the news that it’s moving day for many university students.

For many parents, this time of year can be stressful and not just because of the physical and emotional transition involved.

With college costing more every year, families are looking for ways to manage their finances. While I covered some great tax credits and deductions for parents, I want to focus on school related tax breaks.

Federal education tax deductions and credits focus on post secondary education, but check with your state to see if there are any benefits for paying your child’s education from kindergarten to high school.

Higher Education Credits and Deductions

If you have a child attending college this year or if you are a college student and you are not claimed as a dependent, keep good records because you can get some wonderful tax credits and deductions for college expenses.

American Opportunity Credit

Depending on your household income, you can receive a tax credit up to $2,500 for each qualifying student. Qualifying students have to be enrolled at least half time and be pursuing a degree or some academic credential if you want to claim this credit.

You can claim the tax credit for the first four years of college enrollment for your child, provided your child and the school they attend meet the requirements.

Students can also claim this credit on their taxes as long as they are not claimed as a dependent.

Qualifying expenses include tuition, books, and related materials such as mandatory school activity fees and certain course related equipment. Please be aware that room and board does not count as qualifying expense. You should receive a Form 1098-T from the educational institution you paid by January 31 so that you can include the expenses on your taxes.

Lifetime Learning Credit

Unlike the American Opportunity Tax Credit, you can claim the Lifetime Learning Credit for as many years as you pay qualifying expenses for your higher education.

Another difference you may want to know – Lifetime Learning Credit can be used even if you not pursuing a degree.

You can claim up to $2,000 credit per tax return. Please note, you cannot claim both credits in the same year, but TurboTax will give you the tax credit you qualify for.

Student Loan Interest Deduction

This can be a boost for both you and your child if either one of you took out student loans. You may be able to deduct the interest you paid on the loans up to $2,500 (if your modified adjusted gross income is less than $75,000 for single filers and $155,000 for joint).

This deduction can be a big help as it is used to calculate your taxable income. You should receive a 1098-E by January 31 that will give you information on qualifying interest paid that you can deduct on your tax return.

Thoughts on Back to School Tips

I hope this information helps you when it comes time to file your taxes.   TurboTax will figure out the education tax credit or deduction you are eligible for based on your entries.

Until then, please enjoy this new stage in your lives and I wish your family plenty of success this school year and beyond!

How many of you are parents? For those with children in college or if you’re a student, have you been able to take advantage of these education tax credits or deductions?

Comments (50) Leave your comment

  1. I’m have been a college student since Fall 2010 and still going strong. I was wondering I didn’t complete my fourth year of college until the end of Spring 2014. I have provided my own tuition for 2014. Can I still claim the american opportunity tax credit for 2014? If so, what forms do I need to file.

  2. They failed to mention that the American Opportunity Credit phases out for incomes between $160K and $180K for married couples filing jointly.

    1. C Harris,
      Elementary/High school education expenses are not eligible for any of these education deductions or credits.

      Mary Ellen

  3. My son goes to Junior college and then will transfer to a four year as did his brothers. Since costs are lower the first two years which write off is better to use, the American Opportunity Credit or the LIfe time? My friend said one you can only use for two years and it is better to wait until he is at the more expensive four year school. She lost money because her tax advisor used a credit while he was in J.C. and she couldn’t use it again once he transferred. Do you know what she is talking about?

    1. D. Sweeney,
      The American Opportunity Tax Credit is available to students in their first four years of college, even if it takes them six years to complete it. It can only be claimed four times.
      If you claim the credit for the community college years, then the students takes more than two years at university to complete school, you would need to amend the early returns to unclaim and repay the credit to free it up for the higher tuition years. If you are certain your child will complete school in four years, then you can claim the AOTC for all four years.

      Thank you,
      Mary Ellen

  4. Is there way to claim the Washington DC/ New York trip for High school? We are talking 2400 bucks for the trip ! It is for History class?

    1. Dave,
      Elementary/High school education expenses are not eligible for any of these education deductions or credits. Transportation and lodging expenses do not qualify either.

      Mary Ellen

    1. Serena,
      Elementary/High school education expenses are not eligible for any of these education deductions or credits.
      Mary Ellen

  5. I put 40,00 miles on my car this year to go to school to obtain a different position at my work . How can one claim those miles?

  6. I am a new (this year) home-schooling, stay-at-home mother of 2 in Virginia, with a Navy husband (whose state of residence is Florida). Can we deduct any of our education expenses or lessons for our children (grade- school age)?

    1. Susan,
      Elementary/High school education expenses are not eligible for any of these education deductions or credits.

      Mary Ellen

      1. Mary,
        OK. I understand no deductions or credits under the “Learning Credit” above. Are there other types of deductions or credits that we can use, instead?
        Susan E.

  7. My daughter goes to college from fall 2014. But she is 25, and she was not filing her tax with me and my wife for 2011 and 2012. She is not working in 2013 and now, so I support her on all college expenses. Can I have any credit and deduction in this case. I do file a Form I-134 to her school.

  8. My daughter goes to college from 2014 fall, but she is 25 and she was not filing her tax with me and my wife for 2012 and 2013. Besides, she didn’t work in 2014. So I support her on all the expenses. Can I have any credit and deduction in this case?

    1. Chunhua,
      You can only claim the credit or deduction for yourself, your spouse and dependents you claim on your tax return. If you claim her as a dependent on your tax return, and you paid the expenses, you can claim the credit.
      Thank you,
      Mary Ellen

  9. My child attended college from September 2010 until he graduated in May 2014. I claimed the American Opportunity Credit in 2012 and 2013, Can I claim the credit for 2014, the payment shows up on the 2013 1099 T, even though the tuition was paid in 2014.

    Thanks, Ed

    1. Ed,
      Even though you didn’t pay the tuition until 2014, it was for classes started by March 2014, and was correctly included on the 2013 1098-T. You will not be able to claim the credit again in 2014.

    1. Milton,

      The tax incentives are only allowed for people claimed on your tax return – yourself, your spouse and your dependents.

      Thank you,
      Mary Ellen

  10. Our homeschooled high schooler is dual-enrolled in college classes. The classes are free, but we must pay for the books and other supplies(almost $800 this year). Can we deduct these costs?

    1. Paul,
      For American Opportunity Tax Credit only, expenses for books, supplies and equipment the student needs for a course of study are included in qualified education expenses even if it is not paid to the school. For example, the cost of a required course book bought from an off-campus bookstore is a qualified education expense.
      If your student will be attending a four-year college with higher tuition, you may want to forego the credit this year in favor of the higher credit in future years. You are only allowed the AOTC for four years per student.

      Thank you,
      Mary Ellen

    1. S Heaton,
      If you are asking if you can claim the expenses paid using loan money, the answer is yes. Loan funds do not have to be reported as income for tax purposes.

      Mary Ellen

  11. When I shop at Goodwill I always round up and donate the money to the Goodwill school is that money to be claimed off of my Texas to or can I claim what I paid /bought at Goodwill?

    1. Kanisha,
      If you are donating small amounts every time you make a purchase at Goodwill, and you are getting a receipt for that amount, you may deduct the amount of the contribution. Purchases at Goodwill are not deductible expenses.

    1. Kanisha,
      If the school is a 501(c)(3) charity, and you get the proper acknowledgements from the school, you can deduct your donations as charitable contributions. Your donations will not qualify for education expenses or credits.
      Mary Ellen

    1. Denise,
      Music lessons and tutoring will not qualify for the deduction or credits. However, if a college student is required to take a music class by their school, the cost of that class will qualify, along with the other tuition and fees paid.
      Mary Ellen

    1. Mike,
      According to IRS Pub 970 http://www.irs.gov/pub/irs-pdf/p970.pdf
      “The purchase of computer tehnology, equipment, or Internet access and related services is a qualified elementary and secondary education expenses if it is to be used by the beneficiary and the beneficiary’s family during any of the years the beneficiary is in elementary or secondary school.”
      Other than that, it does not qualify for education tax credits or deductions.
      Mary Ellen

      1. Hi Mary,

        I do have one more question. My parents gifted my daughter $10,000 for tuition.
        The check was made out to myself and deposited into our joint account (wife and I).
        We then paid her tuition and expenses out of this money.
        Is there anything we need to claim on our 2014 return in reference to the monetary gift?
        There is still a balance to cover next semester tuition and expenses that we’ll pay in January 2015.

        Thanks again,
        Greg

    1. Hi Ed,

      One of the requirements for the education credits and deductions is that the student be you, your spouse (if a joint return) or a dependent. If you are claiming your grandchild as a dependent, you could qualify for the deduction or credit.

      Thank you,
      Mary Ellen

  12. Cathy,
    There is no deduction or credit available for delivering children to elementary, middle or high school.
    Thank you,
    Mary Ellen

  13. Can parents claim the cost of transportation delivering their children to the school they attend since there is no school bus available ?

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