Can I write off my tuition on taxes?

Discussion in 'General Distance Learning Discussions' started by gbrogan, Jan 27, 2008.

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  1. gbrogan

    gbrogan Member

    I've searched this forum about taxes and tuition but didn't find too much. I noticed that a lot of the replies contained the very good advice "ask your accountant."

    Well, I don't have an accountant. I use Taxact.com. I have a salary and a savings account. I own nothing so my taxes are very simple. When I was stepping through the questionnaire, it asked about tuition and since I paid over $3k in 2007 for my Aspen tuition I included it and it made my refund jump up a pretty sizable amount.

    I read through the "Who can take this deduction" section of the tax booklet online and don't see any way that my Aspen tuition would be disqualified but I wanted to ask here anyway. I have no experience with including anything on my return but my salary and meager savings account interest.

    I know it cannot be written off on my State return. I'm only asking here about my Federal taxes. Thanks in advance for any replies.
     
  2. mattbrent

    mattbrent Active Member

    Oh boy, yes you can!

    I use TurboTax. You can definitely deduct tuition and expenses if they are paid directly to the school. TurboTax seems to indicate that the courses you take must be to increase your performance at your current job, but cannot be taken to obtain a new job. Luckily, as a teacher, pretty much anything I take counts. I'm not sure the specific criteria, but you can definitely take deductions. I was enrolled full-time with Walden, and my wife took one course with UoP. It allowed us to deduct everything, and we even qualified for a life long learning credit of $2,000.

    -Matt
     
  3. Ian Anderson

    Ian Anderson Active Member

  4. macattack

    macattack New Member

    I do not advise TurboTax. You may want to consult a tax professional, you cannot double dip (deduct AND claim the credit). It is one or the other, use the one that gives you the best tax advantage.

    http://www.irs.gov/publications/p970/ch03.html

    Also, your tuition and fees deduction is limited to $4000 (unless you can write-off more as a business expense). http://www.irs.gov/publications/p970/ch06.html
     
    Last edited by a moderator: Jan 27, 2008
  5. macattack

    macattack New Member

    What is your job title and what are you studying?
     
  6. foobar

    foobar Member

    Good question, but probably doesn't matter. The Lifelong Learning Credit is probably the best way to tke this.
     
  7. mattbrent

    mattbrent Active Member

    We've been using TurboTax for years and have always been satisfied. I may not have been clear in my post. There is no "double-dipping". It has a section for income and a section for deductions and credits. In the deductions and credits section it asks questions about education expenses, and based on what you put it, it tells you the best option for you. Last year I only took two courses and it had me claim a deduction. This year I've pretty much completed a degree, and based on my expenses it said I was eligible for the credit, so it advised me claim the credit. It's very thorough.

    Honestly, I'd prefer using something like TurboTax over a person. My mother got screwed by her accountant because he failed to do a whole bunch of stuff for her, and now she owes the IRS a rather large chunk of change. Although it is a little annoying for TurboTax to ask so many questions, I'd rather be thorough than end up having to go through what my mom has had to deal with.
     
  8. gbrogan

    gbrogan Member

    The degree and job are in the same field.

    According to both Turbotax and Taxact, I'm not eligible for the Hope or Lifetime Learning credits. It added them to the return as just tuition deductions.
     
  9. Rich Douglas

    Rich Douglas Well-Known Member

    You can deduct education-related expenses (within certain limits) for education that keeps you qualified in your current job or propels you in your career. You can't deduct education-related expenses for education and training that prepares you for a new profession, even if you don't intend to use it to go into the new profession. For example:

    A business person decides to take an MBA to advance his business career. Deductible.

    A business person decides to take a JD to become an attorney. Not deductible.

    A business person decides to take a JD to advance his business career. Still not deductible. The IRS won't entertain the idea that the business person didn't intend to go into law. Because the degree qualifies him to do so, it is excluded because it prepares him for a new career.
     
  10. macattack

    macattack New Member

    Rich, this interesting case may be of interest to you.
     
  11. raristud2

    raristud2 New Member

    I don't know. This is my interpretation. I am probably wrong. If the person is enrolled at an eligible academic institution in order to earn a degree, it should not matter his or her intent as long as income limits
    are meet. Tax Pros?

    According to the IRS, "For purposes of the Lifetime Learning Credit, an eligible student is a student who is enrolled in one or more courses at an eligible educational institution to acquire or improve job skills

    In general, an eligible educational institution is an accredited college, university, vocational school, or other postsecondary educational institution, including accredited, public, nonprofit, and proprietary (privately-owned, profit-making) postsecondary institutions. Additionally, in order to be an eligible educational institution, the school must be eligible to participate in a student aid program administered by the Department of Education. The educational institution should be able to tell you if it is an eligible educational institution."

    http://www.irs.gov/faqs/faq-kw104.html

    "Expenses That Do Not Qualify

    Qualified education expenses do not include amounts paid for:

    Insurance,

    Medical expenses (including student health fees),

    Room and board,

    Transportation, or

    Similar personal, living, or family expenses."

    http://www.irs.gov/publications/p970/ch02.html#d0e1743
     
  12. mattbrent

    mattbrent Active Member

    According to TurboTax, you have to be careful about educational expenses. It told us we could only deduct expenses if they were paid directly to the school. Our biggest thing was textbooks. When I took classes with Virginia Tech last year, I bought textbooks on my own, so I couldn't deduct them. With Walden, however, textbooks are included in tuition and are paid to the school. UoP has a course materials fee (or something like that) that is paid per course to the school so the students can access course texts and such online. Because this, too, was paid directly to the school we could deduct it.

    I'm not sure what else qualifies. Textbooks was just our big thing.
     
  13. thesage43

    thesage43 New Member

    I love this thread! It is something that all of us need to be aware of as we advance in our respected fields.
     
  14. saabsrule

    saabsrule New Member

    What about Matriculation fees & Graduation fees from the big three? Can you deduct them?
     
  15. Ian Anderson

    Ian Anderson Active Member

    The Lifetime Learning Credit allows just about all post secondary school tuition up to $2000 to be claimed.
     
  16. Rich Douglas

    Rich Douglas Well-Known Member

    It puts into legal language what I said:

    "A taxpayer may deduct all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. Sec. 162(a).
    Educational expenses, specifically, are deductible if the education maintains or improves skills required by the individual in his or her employment or other trade or business or meets the express requirements of the individual’s employer. Sec. 1.162- 5(a)(1) and (2), Income Tax Regs.

    "No deduction is allowed, however, if the taxpayer’s expense is for education that enables him or her to meet the minimum educational requirements for qualification in his or her employment or if the education leads to qualifying the taxpayer for a new trade or business. Sec. 1.162-5(b)(2) and (3), Income Tax Regs."

    Regarding intent, this was quoted:

    "Nor are the expenses deductible if the MBA qualified petitioner for a new trade or business, regardless of his intent to enter a new trade or business, and regardless of whether his duties significantly changed after he obtained the MBA."

    What I said.

    What I didn't say, and this case seems to say, is that even for business, you have to be careful that the expenses claimed are not for education that is required for your new job. But I thought that was understood.

    To the extent that an MBA would be a requirement for a new job or promotion, you might not be able to deduct it. But that wasn't supported in the case cited, nor would it seem to me likely to be. To wit:

    "Encouraging petitioner to obtain the MBA and speculating that he might advance faster with the MBA is not tantamount to a requirement that petitioner obtain the MBA."

    But keep your receipts!
     
  17. mattbrent

    mattbrent Active Member

    Again, I'm no tax professional, but according to TurboTax, as long as the fees are paid directly to the school, they can be deducted. We were hoping to deduct fees my wife paid to take the GRE, but it wouldn't let us because even though it was technically an expense towards higher education, it was paid to ETS rather than an actual school. Bummer.

    -Matt
     
  18. mhanrahan

    mhanrahan New Member

    I have posted on this topic previously in this forum when it has been discussed.

    Whether you can deduct education expenses and where on the return they are to be deducted depend on your particular situation.

    Prior to the educational incentives (HOPE & Lifetime Learning Credits and the Tuition and Fees Deduction) educational expenses were generally deductible as a schedule C deduction for the self employed or a schedule A (miscellaneous itemized deduction subject to the 2% floor) deduction for employees who were needing the education to maintain or improve job skills (but not qualify for a new occupation). These rules are still in effect and have not changed in many years.

    In addition to the above rules, there are now educational incentives for certain qualified students, which include the possibility of the HOPE credit, the Lifetime Learning Credit or the Tuition and Fees Deduction, each of which are limited in some way and have specific criteria which has to be met. Although you cannot take more than one of these credits/deduction per taxpayer in a year, they can be combined with the deduction opportunities I discussed in the previous paragraph.

    Personally, I deduct all of my education expenses on my schedule C, regardless of where else on the return I could put them, because it results in an overall lower tax for my particular situation.

    TurboTax is a good program IF you know what you are doing and are familiar with some of the nuances in the tax law. I have a few clients that prepare a draft of their returns in TurboTax and have me review it prior to them finalizing it. In every case, there were missed deductions or expenses that could have been placed differently to get a lower tax.

    Mike Hanrahan CPA
     
  19. ShotoJuku

    ShotoJuku New Member


    Interesting.

    How about....A Policeman decides to take an M.S. in Psychology to better understand the criminal mind and intent?

    To Deduct or not to deduct, that is the question? :rolleyes:
     
  20. mhanrahan

    mhanrahan New Member

    Whether something is deductible depends on your particular situation.

    If the degree enables you to practice/enter a different profession, you cannot deduct it.

    For instance, I have practiced in the tax law field for over 20 years. I would like to obtain a law degree to enable to to represent my clients better and to better understand the legal aspects of the tax law.

    If I were to obtain a law degree, I could not deduct it because it would enable me to enter a new profession. Whether I not I chose to is of no consequence. My best course of action is to take the course work piecemeal without pursuing a degree to give me the best assurance (but no guarantee) the deductions would be sustainable if audited.
     

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