So you’ve made the decision to go back to school, and now you’ve got to figure out the finances. Time to find out what’s tax deductible and what kinds of tax benefits are available to you.
No need to panic, there are plenty of tax credits and deductions to help lessen the financial burden of heading back to class.
Meeting with the Boss
Your first step towards tax relief associated with going back to school is to have a sit-down with your employer. As long as you’re staying with your current job while you attend class, you might be eligible for tuition reimbursement from your company – so just ask.
If your employer participates in a tuition reimbursement program, up to $5,250 of the assistance you receive may be completely tax free. Thank you, Uncle Sam.
Dollar for Dollar
Everyone loves tax deductions. However, before you file your taxes, check out the tax credits. You may find that the American Opportunity Tax Credit or the Lifetime Learning Credit might just offer you more of a tax break – dollar for dollar.
The American Opportunity Tax Credit is for students seeking a four year college degree and who are enrolled in college courses at least half time. You aren’t eligible if you’re only taking one class, but you may be eligible for the Lifetime Learning Credit if you are taking only one class.
Deducting School Fees and Tuition
You may be able to deduct your costs for tuition, books, and other fees as an unreimbursed employee expense and if Congress votes once again to extend the expired Tuition and Fees Deduction worth up to $4,000 you may benefit from that. Congress typically extends this tax break and is set to vote soon.
If the Tuition and Fees Deduction is extended, the IRS will allow you to deduct school tuition and required fees, up to $4,000 depending on your income. The key word here is ‘required’ – optional fees like books that aren’t course requirements or new athletic gear for intramurals are non-deductible. Even room and board are not considered requirements.
Financial Aid Repayment
If you made the choice to seek financial aid for your return trip to college, there is still a way to save some money come tax time.
The federal government allows you to deduct up to $2,500 of the interest you repaid on your student loans – each year. Again, your filing status and your income play a key role in determining just how much of a deduction is available.
Tax deductions and credits are pretty straightforward for returning students, but don’t fret if you’re still trying crunch the numbers. TurboTax will guide you through the process to help you find the highest possible tax breaks on your return to the classroom.