Higher education can come with some hefty enrollment fees. But learning about your available tax breaks ahead of time will help you keep more money in your pocket as you advance your knowledge. Whether you’re heading back to school for a new degree or just some general continuing education courses for your current career, you’ll want to brush up on these details to get the most savings.
Tax Credits for Back to School
There are two important tax credits to know when you’re an adult student. Depending on your income, the American Opportunity Tax Credit (AOTC) provides a max credit of $2,500. The qualifications for this credit include being enrolled half-time. You’ll also need to have NOT completed four years of higher education already.
The second credit option is useful for those who don’t qualify for the AOTC. Although the lifetime learning credit maxes out at $2,000 and the phaseout for income happens at lower levels, it’s still better than not having a tax credit at all. Plus, the lifetime learning credit doesn’t require you to be enrolled half-time. You might even qualify for the tax credit just by taking a single class, so it’s definitely worth checking out.
Student Loan Interest Deduction
If you need to borrow money to cover your education costs as an adult, then the student loan interest deduction is a good option. Those who qualify can deduct up to $2,500 of their annual student loan interest on their tax return. Again, this deduction is connected to your income level. You also won’t be able to claim it if you aren’t personally repaying the loan. But it’s another smart option for completing your higher education in a more affordable way.
Ongoing Educational Assistance
Some employers offer financial assistance for team members who want to continue their education with additional courses. In that sense, learning new skills is a win-win for both sides. Employees can feel good knowing that their company is willing to invest in them, and the employer can be proud knowing that their team is staying informed for their related market and industry—or even that they’re exploring new interests.
Employers that can provide a written educational assistance plan in accordance with the tax law can have $5,250 of those initial expenses go tax-free for their employees. This also works as a deduction for the company itself. Moreover, the coursework doesn’t need to be explicitly related to your current position. While typically employers prefer to train for related skills, the ongoing educational assistance plans don’t put parameters on the types of classes you take. That means you can really learn for learning’s sake, and still get a pretty nice discount on the overall costs for education.
If you’re looking for more information on your tax break opportunities in general, then our office is here to help. NSO and Company loves working with new clients to ethically maximize their tax deductions. Proper preparation is key. That’s why it’s better to start your tax planning long before the tax season gets underway. Give us a call at (317) 588-3131 to schedule your consultation! We look forward to hearing from you.