It’s ‘Back to School’ time and every one of you must be busy preparing for the academic year
ahead. Along with students, even parents are busy gearing up for the new school year. Education
is a holistic process, where the students are the ones who focus on studying, but your parents are
also equally involved in ensuring that your students are getting access to the best of resources
throughout their school years. Trina and Paul are parents to teenagers, who are all set to fly out
of their nest. So, while the parents are psychologically preparing themselves to beat the empty
nest syndrome, they are also actively looking out for options that can be availed to help them
financially, at a time when big expenses like tuition fees are awaiting them.

Since school is back in session, let’s discuss some school tax benefits while it’s fresh in peoples’
minds.

Tuition Expenses
Tuition expenses are available up to $4000. Tuition credits are limited, based on adjusted gross
income. Parents can take this deduction if paying for education expenses for themselves, or their
children and other dependents, if they claim the child or dependent on the tax return. Be sure to
only claim what you pay for, what the 1098-T (this is the form the school sends every January
for the past year) says the tuition amount is. The form 1098-T comes to the address of the
student, even though the parents might pay the tuition. Be sure you keep the form 1098-T when
preparing your tax returns, to prove the amount paid for tuition, along with your receipts of
payments made. Grants and scholarships that pay for tuition are not payments you can take on
your return, but they do reduce the costs of school. You can only claim what you pay for. Be sure
to include books, fees, and supplies you pay for as well in the education expenses. Depending on
your income and circumstances, you might be able to get a deduction without itemizing or take a
tax credit; whichever is better.

The American Opportunity Credit is:

• Worth up to $2,500 per eligible student.
• Only available for the first four years at an eligible college or vocational school.
• Subtracted from your taxes but can also give you a refund of up to $1,000 if it’s more than
  your taxes.
• For students earning a degree or other recognized credential.
• For students going to school at least half-time for at least one academic period that started
  during the tax year.
• For the cost of tuition, books and needed fees and supplies.

The Lifetime Learning Credit is:

• Limited to $2,000 per tax return, per year, no matter how many students qualify.
• For all years of higher education, including classes for learning or improving job skills.
• Limited to the amount of your taxes.
• For the cost of tuition and required fees, plus books, supplies and equipment you must buy
  from the school.

For both credits:

• Your school should give you a Form 1098-T, Tuition Statement, showing expenses for the
  year. Make sure it’s correct.
• You must file Form 8863, Education Credits, to claim these credits on your tax return.
• You can’t claim either credit if someone else claims you as a dependent.
• You can’t claim both credits for the same student or for the same expense, in the same year.
• The credits are subject to income limits that could reduce the amount you can claim on your
  return.
• Employers can deduct up to $5250 (for 2023) as Post-Secondary Education Degree Program
  Expenses, per employee, through the business, without the employee paying taxes on the
• money. (This benefit can save taxes for both the employee and the employer.)
• Consider hiring your family and then certain college expenses can be a deduction in the
  business, if the class is necessary for the employee’s job (See the point listed above and
  consider where it’s better to hire your kids through your existing business as employees.
  Then the college courses or programs might be a complete deduction through your business
  as an expense. It’s possible to even get a tax deduction through the business for college
  expenses AND can get an education credit for the same expenses; either for the parent and/or
  the child. Be sure to see your tax preparer to find out the specifics of your circumstances.)
• Employers can also deduct College Education classes paid for employees. The Employer’s
  company may pay for the college classes for employees if there is no discrimination among
  employees and if the classes will improve the existing job skills of the employees taking the
  class. If the class is not relevant to the existing job description of the employee, then the
  previously mentioned limit of $5,250 applies as an employee fringe benefit.

Call today, don’t delay! See how this affects you. We can be reached at 602-264-9331 and on all social media under azmoneyguy.

Related Blog Posts