Teachers, parents, college students benefit from available deductions, credits

“The start of the school year is a good time to remind parents, students, and teachers to save all receipts related to tax-advantaged education expenses,” said IRS Acting Commissioner Linda Stiff in a news release. “Good recordkeeping makes sense because it can help avoid missing a deduction or credit at tax time.”

For educators

With the educator expense deduction, teachers and other educators can deduct the cost of some books, supplies, equipment and software used in the classroom. Eligible educators include those who work at least 900 hours during a school year as a teacher, instructor, counselor, principal or aide in public or private elementary or secondary schools.

For 2007, educators can deduct up to $250 for supplies, regardless of whether deductions are itemized.

According to a study prepared by Quality Education Data, Inc., teachers nationally spend an average of $475 of their own money on classroom supplies and materials each year. Currently, this deduction is scheduled to expire at the end of this year.

For college students and parents

The IRS has three key tax breaks – the tuition and fees deduction, the Hope Credit and the Lifetime Learning Credit – all designed to help parents and students pay for the cost of post-secondary education.

The Hope Credit is a tax credit for college students in their first two years of college. It provides a tax credit of up to $1,650 on the first $2,200 of college tuition and fees. The Lifetime Learning Credit is a tax credit for any person who takes college classes. It provides a tax credit of up to $2,000 on the first $10,000 of college tuition and fees. Unlike the Hope Credit, students only need to be enrolled in at least one course to qualify for the Lifetime Learning Credit, but income limits and other special rules apply to each of these provisions.

“Generally speaking, a tax credit is worth more than a tax deduction,” explained Cindy Hockenberry, NATP tax information analyst, in the release. “A tax credit reduces your tax liability dollar for dollar, while a deduction reduces taxes on a percentage basis depending on your marginal tax bracket.”

Eligible parents and students looking for more information about these education tax breaks should refer to the IRS Publication 970, Tax Benefits for Education, which is available at www.irs.gov.

The National Association of Tax Professionals more than 18,000 members, including individual tax preparers, certified public accountants, attorneys and financial planners.