Which school tuition is a tax deduction? Education: it’s one of the most important investments any of us will ever make, and the quality of our children’s eduction profoundly affects their future. In fact, it was President George W. Bush who wisely said, “Rarely is the question asked: Is our children learning?”
Hmmm. Well, anyway, choosing to improve your skill set and get the qualifications you or your child needs is a seriously smart move, but one that comes at a cost! There’s no doubt that preschool, private school, and college fees can mount up before you know it, which is why you need some form of relief. So, is tuition tax deductible? Well, the simple answer is “yes” in some cases, but you need to fulfill certain criteria.
When you, your spouse, or your child (AKA dependant) is in the midst of studying, there may be certain ways that you can claim back the expenses. Here’s what you need to know about education and tax deductions before filing your tax return.
Are Private Preschool or Catholic School Fees Tax Deductible?
Nope! There’s no doubt about the fact that you want your child to have the very best schooling from an early age. Sadly, though, if you do send your children to a private preschool or private school, it is not deductible.
The reason for that is straightforward enough. State schools are provided for anyone to use, so stingy Uncle Sam feels no need to pay for private school. It’s kind of like choosing to fly first class, and in this case you’re flying solo when it comes to tax benefits.
However, some parents decide to send their kids to private institutions. That means that you have the choice whether you accept those fees or not. Hence, there are no tax breaks for fees that you can elect to pay or not.
Some of the most common questions we get are, “Is private preschool tax deductible?” and “Is catholic school tuition tax deductible?” In both of these cases, the answer will always be no. Private school tuition, even when paid to a church, can’t be considered a donation. In fact, it’s not unless you or your dependent are enrolled in public education that you may be able to start claiming for deductions.
Compulsory classes & Online Learning Courses for employment are tax deductible
There may be times when your boss or a government body asks you to complete a course. In these instances, (including online classes) you should claim tax deductions. You will have to itemize your fees on Schedule A and you may only deduct an amount that exceeds 2% of your Adjusted Gross Income (AGI). While, that may all sound a little complex right now, it really needn’t be.
Here’s an example:
So, if 2% of your AGI happens to be $2,000 and your course fees were $2,800, you can claim a total of $800 dollars back toward your education.
You should also know that this same tax benefit still applies should you choose to get a loan for your course fees. It actually does not matter whether you use your own personal finances or loans, you are still eligible for this tax reduction.
Educational Courses that help you improve your skills may be a tax deduction
Sometimes, courses are not compulsory and your employer will not ask you to take them. Despite this fact, they may still be beneficial to you in a work environment. For example, if you work in marketing and want to take a course in social media management, those skills directly pertain to your career. In this case, you may still be able to claim a deduction. It’s worth checking to see which courses apply before you fill out your tax return.
The Tuition and Fees Deduction: It’s What Makes College a Tax Deduction!
So, is college tuition tax deductible? Well, yes, actually. If you’re studying for a qualified degree, you could find that you’re entitled to the Tuition and Fees Deduction. That means that you can easily reduce your taxable income by up to a rather huge $4,000.
You will not need to itemize the college or tuition fees for this on Schedule A as you might for other fees. That means that filing your claim is much easier than you may imagine. In this case, you can claim for yourself, your spouse, or your dependant. So, if you have a child attending college right now, you can actually claim back for the majority of their fees.
Of course, there are some stipulations in place if you hope to gain the education expense tax deduction. You will need to be below the stated IRS income threshold (which you can check check online). Also if you’re married and filing separately, you will find that this deduction does not apply to you. How much you get off will be entirely based on Modified Adjusted Gross Income (MAGI).
Other Education Tax Credits: The American Opportunity Credit & Lifetime Learning Credit
Finally, you need to know a little something about tax credits. If your child is attending college right now, you may be eligible for the American Opportunity Credit and the Lifetime Learning Credit (informally known as the college student tax credit).
Here’s the tax credit amounts that you may be eligible for:
- American Opportunity Tax Credit: Allows for a tax credit up to $2500. However if yours and your spouse’s combined MAGI is more than $160,000, you will not qualify for this credit at all. More: American Opportunity Tax Credit – IRS.gov
- The Lifetime Learning Credit allows for a tax credit of $2,000 for qualifying expenses of an eligible student. More: Lifetime Learning Credit – finaid.com
Before you rush off to claim this credit, there’s one small thing you should know. If you claim these credit, you may not also get the Tuition and Fees Deduction.
That means that you should work out which option saves you the most money. It’s well worth doing a little research about all of these significant tax deductions to find out what claims work best for your family.
College students can also file their Federal taxes for free, or at a discount
Hopefully you are eligible for one or more of the education tax deductions above, as they are significant tax benefits for students or their parents. Remember that there are also versions of popular tax preparation software, like TurboTax, that offer a discount to both students, and active duty military.
If you are actively enrolled in classes or college, check out the Student edition of TurboTax. Also, for simple tax returns there are free versions:
- TurboTax Free version (Federal is free, state filing extra)
- H&R Block Free version (free federal)
- Hmmm… What’s the best free tax software?
Well, maybe saving a few bucks on tax software is small potatoes compared to the benefit of the top eductation deductions, but hey… every dollar counts! (that’s Economics 101)