Tax Tip: What You Should Know About Education Deductions

Editor’s Note: This article is part of our 2012 Tax Tips series. Robert Flach is an expert with almost 40 years of experience as a tax professional and also blogs as The Wandering Tax Pro.

NEW YORK (MainStreet) – At the end of 2010 Congress extended for two years a laundry list of temporary tax breaks that had expired on Dec. 31, 2009. These included the popular “above-the-line” deductions for educator expenses and students’ tuition and fees, which are still available on the 2011 Form 1040. 

Teachers, counselors, principals, and aides of students in kindergarten through 12th grade who have worked at least 900 hours during the school year can deduct up to $250 of unreimbursed out-of-pocket expenses for books, supplies, computer software, equipment and other classroom materials. 

For married couples, if both husband and wife are qualified educators they each get up to $250 of deductible expenses. Educators who spend more than $250, as most do, can deduct the excess as an “employee business expense” on Schedule A if their total miscellaneous deductions exceed 2% of adjusted gross income (AGI).

Most undergraduate college students get the best tax benefit by claiming the American Opportunity Credit and not itemizing deductions. Graduate students can claim either a Lifetime Learning Credit or the special Tuition and Fees Deduction.

Joint filers with an AGI of $130,000 or less, and single filers with AGI of $65,000 or less, can deduct up to $4,000 in qualifying expenses for tuition and fees and required books, supplies and equipment. The deduction is limited to $2,000 for married couples with an AGI of between $130,001 and $160,000 and singles with an AGI between $65,001 and $80,000.  

These two items are among the 77 tax deductions, tax credits and other tax-saving benefits that expired on Dec. 31, 2011, and will not be around for 2012 unless Congress extends them again, a measure currently under consideration.

If you’re getting ready to file your 2011 tax return, check out MainStreet’s complete guide to free tax tools to help you do it right!