When most of us think about back-to-school savings, we focus on students and parents. Teachers are often the forgotten part of this equation. Not in this column. A good teacher wants her students to become lifelong learners, and what better way to model that for your charges than improving your own knowledge and skills by taking classes to keep on top of the latest teaching trends and learn new skills to make you better at your job.
Now, here's how to save some money along the way.
The Lifetime Learning Credit can be taken every year for a maximum of $2,000 (20% of up to $10,000 in eligible expenses) every year. If you are working towards your master's degree, you can still get this credit to help offset the cost.
Even if you aren't pursuing another degree, just taking a course that will teach you classroom skills can be eligible for this credit. This is unlike the American Opportunity Credit (AOC), which is limited to the first four years of your college career with a mandate that you be at least a half-time student.
If you are a teacher's aide working towards becoming a teacher, then the AOC is the credit for you, as long as you meet the requirements. The third option the IRS provides for writing off your education is the Tuition and Fees Deduction. This is a part of your Adjusted Gross Income (AGI) section of your tax return and a tax pro can help you select the most beneficial credit/deduction when it comes to continuing your education.
STUDENT LOAN INTEREST
Another item in the Adjusted Gross Income section is the Student Loan Interest Deduction. To teach in public schools, you must have a degree from an eligible institution of higher learning. You may have had to take out a few student loans to get your required degree. However, you usually don't start paying on these loans until after you graduate and start your career.
So now that you're teaching, unfortunately you will be paying back those loans. And just as unfortunate: the interest on said loans. While this is hardly good news for your wallet, it can help you with your tax situation with a deduction up to $2,500 per year in student loan interest.
Your Modified Adjusted Gross Income (MAGI) can reduce the amount you are eligible to deduct if it reaches a certain level depending on your filing status and income. Just like the Educator Expense Deduction, this is a more advantageous deduction than those you can claim while itemizing because it is taken on the first page and reduces your income dollar-for-dollar. So just think of that as you write your monthly loan repayment check!
One final tip for teachers involves the potential of a home office deduction. While it is true that most teachers take at least some work home with them, that doesn't mean they are eligible to take a home office deduction. A home office can be deducted only if you don't have an actual location to do your lesson planning and other such administrative work.
Almost all teachers in a K-12 setting have a classroom or an office to do their work. So unfortunately, even though you will probably have to continue grading papers on your living room couch at night, there is no tax relief for your trouble.
Teachers are a vital part of our society and it is encouraging that the IRS recognizes the financial sacrifice they make in the best interest of their students. As this new school year is just getting started, we hope you (or the teachers in your life) know that you are appreciated. Even by the IRS!