Quick Notes on Education Expenses Salt Lake City
As the new school year approaches here are some things to remember regarding certain deductible and non deductible education expenses:
- The cost of private or parochial school tuition is not deductible. However for those children under age 13, some of the costs could be attributable to childcare and may qualify the taxpayer for a tax credit.
- Charitable contributions for school fundraisers are limited by the fair market value of any goods or services you receive in exchange for your donation.
- Earnings in 529 Plans are not taxable and can be withdrawn tax free if the money is used for eligible college expenses.
- Tax deferred accounts like Educational Savings Accounts can be used to pay for qualified educational expenses including books and computers for elementary, high school and for college expenses.
- Student loan interest is deductible as an above the line deduction, meaning you do not have to itemize in order to claim the deduction. You can deduct up to $2,500 of interest. The deduction is gradually reduced if your modified gross income is with a certain range.
- The American Opportunity Tax Credit is a very robust credit wherein you can get up to a $2,500 credit against your taxes per eligible student each year for the first four years of their college education. $1,000 of this credit can be refundable even if you owe no tax. Eligible expenses include tuition, books and supplies. Adjusted gross income limits also apply to this credit.
- A lifetime learning credit is also available for qualified education expenses paid for students enrolled in eligible educational institutions. The credit is a non refundable credit of 20% of qualified education expenses up to a maximum of $10,000 ($2,000 credit). This credit can not be taken in conjunction with the American Opportunity Tax Credit. There is no limit on the number of years this credit can be taken. Adjusted gross income limits apply.
Just some things to keep in mind as you eye the rising costs of education for your children.