Tax Tip: Educational tax benefits cheat sheet

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By The Tax Institute at H&R Block

Teachers and students are back in the classroom across America, but since some educational tax benefits have expired, they need to be aware that they might not be able to take the credits or deductions they are used to taking. Here’s a cheat sheet of which benefits are in effect and those that have expired.

Student-approved and still available

  1. The Lifetime Learning Credit, up to $2,000, is for taxpayers who pay education expenses, such as tuition and fees, for themselves, their spouses or their dependents. This credit does not require the student to pursue a degree, making this an option for anyone acquiring or improving their job skills through an eligible educational institution. More detailed eligibility requirements relate to a taxpayer’s income and filing status.
  2. The American Opportunity Credit, up to $2,500, is for taxpayers who pay tuition and fees and purchase course materials for themselves, their spouses or their dependents. This credit has more restrictions than the Lifetime Learning Credit, but on the up side, it covers the cost of books and other course materials, which is all important to students facing textbook inflation of 812 percent over the last 30 years.

A taxpayer cannot claim both the Lifetime Learning and the American Opportunity credits for the same student in the same year, so taxpayers will need to study up on which credit better suits their specific situation. Proper planning can maximize educational tax benefits.

School is out on these expired breaks

  1. The Educator Expense Deduction expired on December 31, 2013. While teachers were able to claim this $250 above-the-line deduction for classroom expenses when filing this year for 2013, they will not be able to claim it for 2014. Although there is no alternate credit or deduction to cover these specific expenses for 2014, educators could explore deducting unreimbursed employee business expenses as an itemized deduction if their miscellaneous expenses exceed 2 percent of their income.
  2. Likewise, the tuition and fees deduction expired on December 31, 2013. This $4,000 deduction covered the same expenses as the Lifetime Learning Credit and American Opportunity Credit, so taxpayers might consider using either of those credits in 2014 instead of the tuition and fees deduction.

Teachers and students should monitor H&R Block’s newsroom for any changes to the education tax benefits that may occur before tax season begins.

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