Lots of the tax code centers on tax deductions and credits for families with children. For example, if your child attended a summer day camp (not summer school or an overnight camp) the cost of that camp may qualify for the Child and Dependent Care Credit. While this is often referred to as the “day care credit,” some summer camps also qualify. Keep good records and bring them to your tax appointment in the spring.
The American Opportunity Tax Credit (AOTC) is a great way to offset the costs of higher education. To qualify for the AOTC, you must meet all three of the following criteria:
1. You, your dependent or a third party pays qualified education expenses for higher education.
2. An eligible student must be enrolled at an eligible educational institution.
3. The eligible student is yourself, your spouse or a dependent you list on your tax return.
The AOTC can offset 100% of the first $2,000 and 25% of the second $2,000 of qualified education expenses paid. There is a phase out for higher income taxpayers and a refundable portion for lower income taxpayers so each situation is unique.
Be careful with number 3! If a student claims himself as a dependent, he claims the education credit as well. However, students often qualify as dependents on their parents’ return, and the parents often recognize a greater tax benefit when claiming the credit. Make sure your student knows to talk to you before asserting his independence and filing his own return.
In addition to the AOTC, higher education costs can be offset by the Lifetime Learning Credit, the Tuition and Fees Deduction and the Student Loan Interest Deduction. While education tax benefits are plentiful, they are also complicated. For more information, refer to IRS Publication 970 or give us a call.
As for football, many colleges and universities charge a booster fee for the right to purchase season tickets for football and other sports. While the cost of the tickets themselves is usually not deductible, the booster fee may be. If the fee is paid to the school or for the benefit of the school and gives you the right to purchase tickets, the cost of the booster fee may be 80% deductible as an itemized deduction on Form 1040, Schedule A.
Children aren’t the only tax considerations, however. Has your income changed since you filed your last return? Have you started school or started a business? Married or divorced? Retired? Had a baby? Purchased a house? Incurred serious medical expenses? Changed your health insurance? These and many other life experiences can affect your tax return so planning for those events now can save you money later. Enrolled agents are America’s Tax Experts® and we pay attention to all this stuff so you don’t have to.