Tuesday August 14, 2018
IRS Highlights Education Benefits
Teachers have three potential benefits. An educator may deduct "above the line" amounts up to $250 so long as they are unreimbursed business expenses. This deduction is available for kindergarten, elementary or secondary school staff who teach at least 900 hours per year.
A second benefit for teachers who itemize deductions is to claim "out-of-pocket items such as class supplies, training and travel." This is a miscellaneous deduction.
The third option is for teachers who are continuing their education. They may qualify for the Lifetime Learning Credit or American Opportunity Tax Credit.
Students may also benefit from the Lifetime Learning Credit or American Opportunity Tax Credit. In addition, they may have a Qualified Student Loan used to pay higher education expenses for themselves or a spouse. If so, they may qualify for a special deduction for paying interest on a student loan. To qualify, their modified adjusted gross income (MAGI) in 2017 must be under $80,000 for a single taxpayer or $165,000 for a joint return.
Work-related education may also qualify for an itemized deduction. Applicable education that is used to improve work skills may be deductible for both employees and the self-employed. Self-employed persons may reduce their self-employment tax and their income tax.
Another excellent benefit for funding education is a Sec. 529 plan. Section 529 plans are administered by each state. They permit contributions of cash up to five annual exclusions ($70,000 total transfer in 2017). The contributions of cash will be invested and grow tax free. You can withdraw tax free any payments of tuition, fees and other qualified expenses. The expenses must be at a postsecondary institution.
Editor's Note: Additional information for teachers and students is available on www.irs.gov. Another helpful website to learn about Sec. 529 plans is www.savingforcollege.com.