Going to college is expensive and yet necessary in the modern world. Many people must get a degree in order to enter the workforce. In addition, many careers are increasingly requiring ongoing education both to keep your job and to get promoted to the next level. More US workers are part time students than ever before, meaning that more people qualify for an education expenses tax deduction.
Who Can Take an Education Expenses Tax Deduction?
The IRS is not kind enough to fund anyone who signs up for a college class, but many people still qualify for hefty tax breaks. According to IRS Regulation 1.162-5, a person can deduct expenses if the education is required by the employer in order to stay employed or if the education will improve or maintain the worker’s skills in their current field. In addition, people are disqualified from taking this deduction if the education they seek is a minimum requirement for the job or is preparing them for a new job.
This may seem confusing. However, the basic principle is simple. If you need education to remain in your job or to improve your prospects in that job, this tax break is for you. If you are training for new work, then you do not qualify. Tuition for a bachelor’s degree is only rarely covered under this law because the education required is so broad that it generally is not 100% applicable to your current field. In addition, a bachelor’s degree almost always qualifies you for employment in a new field, so it is automatically disqualified.
What Expenses Are Covered?
If you are one of those lucky enough to qualify for this tax deduction, there are a wide variety of expenses that are completely deductible from your taxes. In this area, the IRS is uncharacteristically generous. The deduction includes tuition, books, and supplies. In addition, it covers lab fees, tutoring, and even word processing expenses such as printing. You can also write off transportation expenses needed to commute to classes. The education expenses deduction can be a significant form of tax relief to those who qualify to use it.
If you believe that you qualify for this deduction, it is crucial to talk to a CPA. The fine details of this law and how it has been applied are complex. Audits and penalties await anyone who tries to use it when they do not qualify. However, the huge tax breaks involved make it worthwhile to look into whether you can take this tax break on your next return.
