Back to School.
Like many parents, you may be anticipating this time of year. After weeks of summer vacation, it is time to get back to a routine. You cannot wait for scheduled bedtimes and less “I’m bored” pleas.
However, for others, back to school means back to work, tuition payments, or expensive school supplies.
Whether you are excited or not, Back to School time is here. The CPA Practice Advisor discusses that now is the time to starting thinking about back to school tax breaks and deductions available for qualifying expenses.
The article offers 11 Back to School tax tips for parents.
- Private school tuition and school uniforms are not deductible.
- Before and after school childcare, for a child under 13, may qualify for a tax credit.
- Tax deductions for school fundraisers are limited to the amount over market value of the goods or services received.
- Moving expenses to go to college are not deductible.
- Earnings in 529 plans are not federally taxable. The money grows tax free and withdrawals used for eligible college expenses are not taxable.
- Tax-deferred accounts can be used to pay for educational expenses (e.g. Coverdell Educational Savings Accounts).
- Student loan interest is deductible above the line.
- American Opportunity Credit (AOC) can amount to $2,500 in tax credits per eligible student and is available for the first four years of post-secondary education.
- Lifetime Learning Credit provides up to $2,000 credit per year for qualified education expenses for a student enrolled in an eligible educational institution. As of now, there is not limit to the amount of years this may be claimed.
- Tuition and Fees Deduction is an above the line adjustment that applies to qualified educational expenses for an eligible student.
- A Roth IRA can be used for student’s income earned. Up to $5,5000 of income earned can be contributed to a Roth IRA, which grows tax-free.