August 2020
College & Tax Planning

School may look a little different this year, but there are many tax credits and potential saves that teachers and college students may be entitled to. Eligible teachers and other educators can still deduct certain unreimbursed expenses on their tax return next year. 

Who is considered an eligible educator: The taxpayer must be a kindergarten through grade 12 teacher, instructor, counselor, principal or aide. They must also work at least 900 hours a school year in a school that provides elementary or secondary education as determined under state law. 

Things to know about this deduction: Educators can deduct up to $250 of trade or business expenses that were not reimbursed. As teachers prepare for the school year, they should remember to keep receipts after making any purchase to support claiming this deduction. 

The deduction is $500 if both taxpayers are eligible educators and file their return using the status married filing jointly. These taxpayers cannot deduct more than $250 each.  Qualified expenses are the amounts the taxpayer paid themselves during the tax year. Examples of expenses the educator can deduct include: 

• Professional development course fees

• Books

• Supplies

• Computer equipment, including related software and services

• Other equipment and materials used in the classroom

We all have teachers in our lives that could use this extra deduction, especially in times like this! 

Also, if you have a college student of majority age, it may be more beneficial for your student to file their own taxes than for you to claim them as a dependent. If your student has any for of earned income, but paid little in the way of income taxes, they may be eligible for certain education credits like the American Opportunity Credit, or the Lifetime Learning Credit, and potentially CARES Act stimulus checks. 

You can claim the American Opportunity Credit tax credit if you’re an undergraduate and have not completed the first four years of post-secondary education as of the beginning of the year. You’ll need to be in a program at a recognized post-secondary educational institution working toward a degree or certificate. 

The Lifetime Learning Credit allows you to claim a credit of up to $2,000 on qualified education expenses. Unlike the American Opportunity Credit, this is nonrefundable. You won’t get money returned to you, but it can reduce what you owe. Unlike American Opportunity, the Lifetime Learning Credit is good for postsecondary education and any courses to acquire or improve job skills. 

These are just a few potential ways to claim credits and deductions that you may qualify for. Talk with your CPA about the best strategies for you! 

If you have questions, please contact us.

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