Back to School Tax Tips

With all the kids finally back in school it seems fitting, to post a few back to school tax tips for parents. Here are some tips:

  • School uniforms are not deductible. The IRS does not allow deductions for school uniforms, even if required, for public or private schools.
  • The cost of private school is not deductible. This includes both traditional private and parochial schools though exceptions apply in some circumstances such as for special needs children and when it serves as child care.
  • The cost of private kindergarten – and some upper grades for students up to the age of 13 – may be deductible. If you can separate the educational costs of your program from any child care component, you may be able to deduct the child care piece. Clearly this is easier for younger children since many programs are already separated out for you (half day kindergarten, for example, is often supplemented by a child care program in the afternoons).
  • Expenses for before- or after-school care of a child in kindergarten or a higher grade may be deductible so long as the costs qualify. Generally, qualifying costs for child care are limited to the care for your own children under the age of 13, qualifying as your dependents, for care while you work or while you are looking for work. Some cost limitations and other restrictions may apply.
  • You must subtract the cost of goods received when you contribute to band and sports fundraisers. The IRS requires you to subtract the value of anything you receive in return for a charitable donation.This means that the amount paid for candy drives, etc. are basically not deductible. Better solution: just write a check directly to the school.
  • The earnings in 529 plans are not taxable for federal purposes. A 529 plan is an education savings plan which takes its name from section 529 of the Internal Revenue Code. Investments in these plans grow tax-free and withdrawals are never federally taxable so long as you use them for eligible college expenses, which includes most costs associated with college such as tuition and room and board. Most states, like Georgia, have some amount that is deductible when contributed if you use that states 529 plan.
  • Education tax credits for college include books and fees.  The amount of your “qualified expenses” for claiming the Education credit included tuition plus required books and fees.  However, they do not include room and board expenses. 
  • You can use certain tax-deferred accounts to pay for qualified education expenses for elementary, high school and college expenses. If you invest in an Educational Savings Account, your money grows tax-deferred. Withdrawals are federal income tax free so long as the money is used for “qualified education expenses” including books, fees, computers and even uniforms. You can contribute up to $2,000 per year to an ESA per beneficiary so long as you qualify.
  • Student loan interest is generally deductible  on your tax return as an above the line deduction. This means that you don’t have to itemize in order to claim the deduction. The IRS also allows you to take the deduction even if your parents made the payments during the year, so long as your parents are not obligated to make the payments. Income limits and other restrictions may apply.

Have a great school year.  If you have any questions regarding deductible education expenses, please do not hesitate to contact us.

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