Tuition and Taxes

For many people, college tuition can be very daunting. There are so many expenses to consider in addition to tuition – books, supplies, etc. While the government does not provide free college, it has created some tax write-offs that can be available for certain college expenses. Let’s briefly explore a few of these.

Self-employed individuals can deduct the cost of certain work-related education. According to the IRS, if your education maintains or improves the skills you need in your present type of work or is required by law to keep your current type of work, you can include educational costs, including tuition, supplies, and certain travel expenses, as deductions on Schedule C or Schedule F (Form 1040).

Under IRS Code Section 127, employers can create written Educational Assistance Programs. Under these programs, employers can exclude up to $5,250 annually per employee for assistance provided toward employee education. The education obtained does not have to be job-related, and the funds can cover more than just tuition. The program cannot discriminate in favor of highly paid employees, nor can over 5% of the amounts paid to go toward the education of shareholders or owners.

Under IRS Code Section 132(d), job-related educational expenses provided by an employer are excludable from an employee’s income as a “fringe benefit” of employment. Employers do not have to have a written program. This can be applied to educational contributions that exceed the $5,250 threshold of an Educational Assistance Program. This program also covers more than just tuition. The professionals at The Center for Financial, Legal, and Tax Planning, Inc. are more than knowledgeable with regard to tuition deductions. Please contact us at (618) 997-3436 for more information.