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Helpful Tax Resources

Education Tax Incentives

This information is designed to provide the reader with a brief overview of a few of the several education tax benefits available under federal tax law and is not to be used for tax planning purposes. Please consult your tax advisor for such assistance. Generally, a taxpayer may be able to claim any number of education tax benefits as long as different qualifying expenses are used to figure each one. For more information regarding the education tax benefits described below or information regarding additional education tax benefits, please click on the reference links found at the bottom to this page.

Other Education Tax Benefits

Student Loan Interest Deduction

Taxpayers who have taken out loans to pay the cost of attending an eligible educational institution for themselves, their spouses, or dependents generally may deduct the interest they pay. The maximum student loan interest a taxpayer is permitted to deduct is $2,500 annually.

The limitation is the same regardless of how many students are in the taxpayer's family.

Business Deduction for Work-Related Education

Generally, taxpayers may be able to deduct the costs of qualifying work-related education as business expenses. If the taxpayer is an employee, the deduction is taken on Schedule A (IRS Form 1040). If the taxpayer is self-employed, the deduction is either taken on Schedule C or Schedule F (IRS Form 1040).

Qualifying work-related education is education that meets at least one of the following two tests:

1. The education is required by the employer or the law to keep the taxpayer's present salary, status, or job. The qualifying education must serve a bona fide business purpose of the employer.

2. The education maintains or improves skills needed in the taxpayer's present work.

However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it is needed to meet the minimum education requirements of the taxpayer's present trade or business, or it is part of a program of study that will qualify the taxpayer for a new trade or business.

Education expenses such as tuition, books, supplies, lab fees, certain transportation and travel costs, and costs of research and typing when writing a paper as part of an educational program may be deductible.

More Helpful Resources

IRS Tax Information for Students:

http://www.irs.gov/individuals/students/index.html

IRS Forms and Publications - Reference Information

http://www.irs.gov/formspubs