2019 Education Tax
The TurboTax deluxe edition tax deduction finder platform can be enhanced with several other tools that relate to particular areas of expenses you may incur during the year. Education expenses can add up, but they may offer valuable tax deduction advantages.
TurboTax can help you find out which education credits and deductions you may be eligible to claim on your income tax return.
Deducting Education Expenses.
Adding support to the TurboTax Deluxe Edition is the TurboTax Dependents Credits & Deductions Calculator.
This tool works well with TurboTax Deluxe to offer tax support for parents and students that accumulate education expenses.
For parents claiming a student on their tax return, many factors may apply to the student that will be beneficial to the parents for tax deduction purposes.
For students on their own, TurboTax Student Tax Software can add additional support for simple tax returns.
Many questions need to be answered to gather the information needed to determine tax benefit qualification.
How to use the TurboTax Education Credits & Deductions Calculator, a Step By Step Guide
- Was the student enrolled in a degree, certificate or credential program during the tax year being filed?
- Is the student currently enrolled in college level courses, but has not yet completed the first 4 years of college education?
- Has the student taken one or more courses to acquire or improve their job skills
- Was the student enrolled in a program for at least half time for an academic period or more
- Was there interest paid on the student’s loans
Education Credits & Deductions Calculator
If you answered yes to any of the above, you may qualify for some of the following education credits and deductions. TurboTax can help you determine which of the following student tax benefits will save you the most money on your tax return.
Lifetime Learning Credit:
You may be able to claim a credit up to... $2,000 per tax return
What is the Lifetime Learning Tax Credit? Do I Qualify?
To qualify for the Lifetime Learning credit, you or your student
must have made tuition and fee payments (after high school) to a
post-secondary school within the tax year. Those who incurred these
fees may qualify to claim the credit for post-secondary classes. You
are not required to be working towards a degree. However, depending
on your filing status, income limitations exist, if you earned too
much, you may not be eligible to claim the credit.
The Lifetime Learning credit reduces your tax bill on a dollar-for-dollar basis. This may be applied to a portion of the tuition and fees you pay for a dependent, your spouse, or yourself to enroll in school.
When you are calculating the credit you can include the cost of tuition, fees, textbooks and supplies you are required to purchase directly from the school as a condition of enrollment. If the item is not mandatorily required for the class, then the cost cannot be included in the credit. Currently you can claim is up to 20 percent, or a maximum of $2,000. To determine your eligible costs, your educational institution should send you a Form 1098-T listing qualified fees.
The qualified fees are reported on Form 8863 at the end of the year using parts 3 and 6 to calculate the eligible credit amount. Include this amount on your tax return and attach Form 8863.
The IRS only allows one tax reduction per student, per year. The American Opportunity Credit may provide a greater tax savings than the other choices for the first four years of post-secondary education. Check that first since you cant claim the American Opportunity credit or a tuition deduction in the same year you claim the Lifetime Learning credit.
Tuition and Fees Deduction:
This education deduction may be worth up to... $4,000
What is the Tuition and Fees Deduction? Do I Qualify?
Those who don't qualify for the Lifetime Learning Credit or the American Opportunity Credit, may be eligible for the tuition and fees tax deduction. This deduction does not apply if you are qualified to be claimed as a dependent, or if your using the Married Filing Separately tax filing status. It may also be reduced or eliminated for higher income level earners.
To qualify, you must have paid accepted higher education expenses for a dependent, your spouse, or yourself. You cannot claim this deduction for expenses your dependent paid themselves.
- tuition and enrollment
- course-related books and lab fees
- supplies, or equipment
- other expenses required by eligible educational institutions
Eligible educational institution include any university, college, vocational school, or post-secondary educational institutions that are eligible to participate in a student aid programs administered by the US Department of Education.
The TurboTax Education Optimizer helps you choose the education credit or deduction that gets the best financial outcome for your federal income taxes.
Non qualifying expenses include extracurricular activities, room and board, insurance, student health fees, living expenses like food, transportation, housing, fees for noncredit or "fun" courses that are not mandatorily required to earn your degree.
Student Loan Interest Deduction:
You may be able to deduct interest up to... $2,500
What is the Student Loan Interest Deduction? Do I Qualify?
Interest on a loan used to pay for tuition, room and board, books, supplies, and fees for a dependent, your spouse, or yourself is deductible. This student loan interest deduction can reduce your taxable income by up to $2,500 even if you aren't itemizing.
The loan must be in your name (or your spouse's if filing jointly) even if the interest was paid by someone else. However, if you are claimed as a dependent, neither of you may claim the deduction.
Phase-out income levels apply to determine how much of a deduction you're entitled to. Student loan interest can be reported on Form 1098-E, which you should receive if you paid $600+ in interest.
American Opportunity Tax Credit:
You may qualify for an education credit up to... $2,500 per student
What is the American Opportunity Tax Credit? Do I Qualify?
The American opportunity credit offers greater tax savings than the tuition deduction since it reduces the tax you owe on a dollar-for-dollar basis. It allows taxpaying students the opportunity to settle the cost of attending college. Eligibility requirements include:
- Must be a student that hasn't completed four years of schooling
- Must be enrolled in at least one academic semester
- Must maintain at least half-time status in program leading to a degree or other credentials
- Must not have been a state or federal criminal on a drug conviction, if you have, you aren't eligible for the tax credit
Qualified Expenses Include:
- Tuition and fees to an eligible educational institutions
- Colleges, universities, post-secondary schools that satisfy requirements to participate in the U.S. Department of Education financial aid programs
- The cost of books, supplies and equipment purchased for the program of study.
- tax-free scholarships or fellowships, federal Pell grants, employer tuition grants, school refunds and other non-taxable assistance received other than an inheritance or gift
- expense you incur for medical insurance, room, board, or transportation
Only one American opportunity credit is available per eligible student per tax year. If you have two eligible students, you have to claim the same credit for both dependents. The credit is 100 percent of the first $2,000, plus 25 percent of expenses in excess of $2,000, with a maximum annual credit per student is $2,500.
The student, or taxpayer who claims the student as a dependent may claim the credit on IRS Form 8863. Phase out income levels apply.