Education Tax Deductions, Part I

Tax and Money Tip of the Week
Education Tax Deductions, Part I
November 16, 2011 | No. 68

With the current weak economic conditions, many people are considering additional education to refresh skills or acquire new ones.  This week we have more to discuss on tax breaks that may be available to you if you are going back to school.

Here is a brief overview of two deductions and how they can be a real benefit to help ease the burden of higher education costs.

Business Deduction for Work-Related Education – One of the benefits of this deduction is that there is no dollar limit on the size of the deduction or any income phase-out.
To claim this deduction you must:

  • be working
  • itemize your deductions on Schedule A of your 1040 if you are an employee
  • file a Schedule C if you are self-employed AND
  • have expenses for education that qualify

To qualify as an expense the cost must be either required by your employer or the law to keep your job or improves skills needed in your present work.  The education does not qualify if it is for a new trade or skill.

Employer-Provided Educational Assistance – If you receive educational assistance benefits from your employer under an educational assistance program, you can exclude up to $5,250 of those benefits from tax each year for payments for education.  This exclusion applies to undergraduate and graduate tuition and there is no income phase out.  The payments may be made for tuition, books, supplies and equipment.

Call us if we can help you determine if you qualify.  More on Education tax deductions next week.

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®

…until next week.

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