Now that you’re in summer-time bliss on break from college you may be dreaming of sleeping in late for a few months until fall, but summer may be a great opportunity to get ahead and take a course or two. By taking online classes, you can lighten your course load in the fall and still catch some shut eye. Even if you are working and want to get that promotion, you can take an online class to improve your skills. Taking an online class this summer may not only help you get ahead in school and in your career path, but you may also be able to get a tax breaks.
When taking online classes there are a few things you need to know about how they affect your taxes.
You May be Eligible for Tax Credits
Tuition, fees and other expenses paid for your online classes may be included as part of the American Opportunity Tax Credit or Lifetime Learning Credit if you are taking your online classes from a college, university, vocational school, or other post-secondary school. This includes books, supplies, and other related equipment you need for your classes. You may be able to take the American Opportunity Tax Credit for the first four years of college worth up to $2,500 per person or the Lifetime Learning Credit worth up to $2,000 per tax return, even if you are only taking one class.
Business Deduction for Work-Related Expenses
If you are employed and are considering taking an online classes to improve your skills, you may also be able to deduct the costs as an unreimbursed employee expense as long as you itemize your deductions. If you can itemize your deductions, your unreimbursed employee expenses and other expenses have to be more than 2% of your adjusted gross income.
While being able to take advantage of the American Opportunity Tax Credit or the Lifetime Learning Credit may give you a bigger tax break than deducting the expenses as an unreimbursed employee expense, you have another option if you don’t qualify for either. When you are self-employed, you can deduct your expenses for qualifying work-related education directly from your self-employment income. This reduces the amount of your income subject to both income tax and self-employment tax.
There’s no need to know these tax laws. TurboTax will ask you simple questions about you and your education and give you the tax deductions and credits you’re eligible for.
