Use IRS Tax Credits to Help Pay for Education
For the spouse left behind during deployment, finding a way to fill those lonely hours can be a challenge. What if you could do something with that time that would lead to a brighter future? This could be the perfect time to go back to school.
The IRS will help pay for advanced education expenses, making a return to school possible even on a tight budget. Taxpayers can use the money they normally spend on income taxes to help pay for school, provided they take classes with the purpose of getting a job or improving their work skills.
There's even tax help for daycare expenses when you need babysitters so you can attend school.
The tax code includes special rules to make life easier for families and military personnel. These include two education credits: the American Opportunity Education Credit and the Lifetime Learning Credit.Both can pay any taxes due during the same year you go to school, even if you pay your education costs with a credit card or loan. Qualifying expenses include class fees, online courses, textbooks, lab fees and most required equipment. And you get to choose the credit best for your situation.
The American Opportunity Education Credit pays up to $2,500 per student; it covers the first $2,000 spent plus 25 percent of the second $2,000. To qualify, you must be enrolled at least half-time and working toward a degree, certificate or other educational credential.
The Lifetime Learning Credit is for all grad students, undergraduate studies and people who take classes for job skill improvement. It gives back up to 20 percent of the first $5,000 spent or financed, and can cut up to $1,000 off your tax bill.
The Child and Dependent Care Credit is great for students who need daycare to attend school. It can lower taxes by up to $3,000 for one child or $6,000 if you have two or more. There is no income limitation, but someone with an adjusted gross income of $43,000 or more only gets 20 percent of those costs returned, while those who earn less get up to 35 percent. Combat zone and military income exclusions are not included in your AGI, which may qualify you for the bigger credit.
-- KiKi Canniff is a retired tax consultant. Her latest book, 116 Tax Savvy Tips for Military Personnel, helps servicemen and women understand all of the military and family tax rules that were written to lower their income taxes.
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