For college students and their parents, the start of the school year is an important time for tax planning. In addition to shopping for supplies, coordinating housing, and scheduling courses, parents of college students should also consider whether they will be able to write off college expenses at tax time.
Tax Credits
College students may qualify for the American Opportunity Credit or the Lifetime Learning Credit. The income threshold for the American Opportunity Credit is $180,000 for spouses who are married and filing jointly. For a single, head of household taxpayer or widow(er), the threshold is $90,000. Thresholds for the Lifetime Learning Credit are $127,000 for married couples filing jointly and $63,000 if an individual is a single head of household or a qualifying widow(er). Typically, a filer must have tax liability to benefit from tax credits; however, up to 40 percent of education credits may be refundable.
Who Can Claim an Education Tax Credit?
Eligibility to claim an education tax credit is not based upon which parent pays for the student’s education; the parent who claims the student as a dependent on his or her tax return is eligible to also claim the tax credit without regard to whether that parent paid the education expense. For example, if a college student’s education is funded by a grandparent, but the student’s parents list him or her as a dependent when filing taxes, the parents will then be eligible to also claim an education tax credit.
Tax Deductible Education Expenses
While tuition is the most immediate tax deductible education expense that comes to mind for most taxpayers, there are several other expenses that qualify. Laptops, books, equipment, and school fees can also be deducted. There are several intricacies taxpayers must know when deciding which expenses they can claim as a deduction. For example, under the Lifetime Learning Credit, the purchase of a book will qualify if the book is required for admission and purchased at the school. However, these requirements are not applicable when deducting the cost of a book under the American Opportunity Credit.
Parents should consider enlisting the services of a CPA if they would like to write off college expenses when filing their tax returns. Gary M. Kaplan is qualified to assist taxpayers in Florida, New York, Maryland, Washington, D.C., and Utah with income tax filing and planning. More information is available at gkaplancpa.com.
