August can be an expensive month for families with children heading back to school… and some of these expenses may serve you on your tax return. So we are going to spend five minutes summarizing a few of the expenses worth paying attention to.
Tax Deductions for School Fundraisers
If you make donations to your child’s public school, you may be able to deduct the donation amount from your taxable income as a charitable donation.
If you receive something in return for your donation, then the reasonable value of the property you receive must be subtracted before you take the deduction.
For example: you donate $250 to receive a sweatshirt that sells for $25. In this situation, you would subtract the $25 value of the sweatshirt and use the remaining $225 as a charitable deduction.
After-school activities and Child Care Credit
For a child under the age of 13, the cost of before or after school care may qualify for a tax credit. Your child must be attending the program so that you can work, look for work, or go to school. The program must also be considered “child care,” so hour-long tutoring sessions don’t qualify.
The American Opportunity Tax Credit for education expenses can reduce your tax bill by up to $2,500
American Opportunity Tax Credit
The American Opportunity Tax Credit can amount to $2,500 in tax credits per eligible student and is available for the first four years of post-secondary education. Eligible expenses include tuition, books and required supplies. Room and board, medical expenses and insurance do not qualify for the AOTC. Income limits apply and the credit requires a 1098-T.
Lifetime Learning Credit
The Lifetime Learning Credit can create up to $2,000 in tax credits for qualified education expenses. The credit is for 20% of the qualified education expenses (up to $10,000 in tuition and fees). There is no limit on the number of years this credit can be claimed and you may be able to deduct qualified education expenses paid for yourself, your spouse, or your dependents. The deduction phases out after certain income ranges.
Tuition and Fees Deduction
The tuition and fees deductions can reduce the amount of your taxable income by $4,000. This deduction is claimed as an adjustment to income, so you can claim this deduction even if you don’t itemize deductions on your Schedule A. This deduction may help you if you don’t qualify for the American Opportunity or Lifetime Learning credits.
The qualified expenses are for undergraduate, graduate or post graduate courses. There is no limit to the number of years the credit can be claimed and you may be able to deduct qualified education expenses paid for yourself, your spouse, or your dependent(s), but the deduction phases out after a certain income range. You must file jointly with your spouse to claim this credit.