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Back To School Tax Tips

School has been back in session for almost a month now. I’m sure all of the college students were glad to get some breathing room from their parents, and the parents of elementary school, middle school, and high school students were glad to get some breathing room from their kids!

Education does not come at a small price. We often get a lot of questions about what school expenses can and cannot be deducted. So, let’s take a look at some of the tax breaks that are available to salvage some of the money spent on educational  expenses.billy-madison-back-to-school

Private School Tuition And School Uniforms 

The cost of private school tuition is not deductible on your federal tax return. However, the State of Wisconsin does allow for a subtraction to income as of 2014. The subtraction is limited to $4,000/child for grades K-8 and $10,000/child for grades 9-12. Unfortunately, even if school uniforms are required, the cost is not deductible.

Before/After School Care

For children under age 13, the cost of before or after school care may qualify for a tax credit. These costs would be treated in the same manner as day care expenses and would be categorized under the Child Care Credit.

College Tuition Credits/Deductions

There are three separate tax breaks for paying college tuition. The American Opportunity Credit is available for the first 4 years of post-secondary education at a qualified institution. The Lifetime Learning Credit can be used for tuition after the first 4 years of education, there is no limit on the amount of years this can be taken. The Tuition And Fees Deduction is an alternative to the Lifetime Learning Credit, and can be taken if it provides a better outcome than the credits. It is important to keep in mind that scholarships and grants reduce the tuition paid, and if the amount of scholarships and grants exceeds tuition, it is to be claimed as income. Qualified expenses may include required books and supplies for classes, but it does not include room and board.

Student Loan Interest

Once you make it through the college gauntlet, you have the daunting task of paying off your student loans. The amount of interest that is deductible is up to $2,500, however, this amount may phase out based on income level.

529 Plans

One way to help pay for college is to start a 529 Plan early. This is a mutual fund account that grows like an IRA. However, the earnings on this account are tax-free as long as the money is used in the future for eligible college expenses.

What About The Educators?

If you are a teacher, you are eligible to deduct up to $250 of expenses for classroom supplies. Any out of pocket expenses that you accrue, make sure to keep those receipts for tax time. As of 2015, the State Of Wisconsin also adopted this deduction for State tax return purposes.

 

As I mentioned before, education is not cheap. It is important to be aware of possible tax benefits from all of the money that you spend on your children’s education. Hopefully this list provides some clarity for all the parents out there, and as always if you have any questions, please give us a call! These deductions are just part of how we help people in Milwaukee, Waukesha, New Berlin, Brookfield, Wauwatosa with tax preparation.

Here’s to a successful school year for all of the students out there, and some relaxation for the parents!

 

Until next time,

Nicholas Hammernik, EA

Nick is Talking Tax To Milwaukee. Combing the boring topic of tax with the latest news in pop culture and sports.

2 Responses to Back To School Tax Tips

  • Hi Nick,

    Does that school supply deduction apply to college instructors, too? I am teaching two college courses this semester, adn I spend money on ink, paper, dry erase markers, reference books, etc.

    Kind regards,

    Julie

    • Hey Julie,

      This deduction only applies to teachers grades K-12. However, you may be able to deduct those expenses as work-related expenses on your itemized deductions if the total amounts to more than 2% of your adjusted gross income. This would be considered Miscellaneous Deductions on the Schedule A.

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