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Who Can Take The Educator Expense Deduction in 2023

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Who Can Take The Educator Expense Deduction in 2023

Have you ever wondered how you can get a little extra help when it comes to the cost of education? Well, you're in the right place because we'll dive into the world of education expenses tax deductions and credits in 2023. Whether you're an educator looking to make the most of the educator expense deduction, a self-employed individual hoping to figure out what college expenses are tax-deductible in 2023, how to take the college tuition tax deduction or a student looking for education tax credits in 2023, we've got you covered.

Table of contents

Key takeaways...Read more

Educator expenses deduction 101...Read more

I’m a private tutor. Can I deduct education expenses for my business?...Read more

Is there a private school tax deduction?...Read more

Is college tuition tax deductible in 2023?...Read more

Are college application fees tax deductible?...Read more

Education tax credits...Read more

The Lifetime Learning Credit...Read more

The American Opportunity Tax Credit...Read more

How can I claim the education expenses tax deduction and tax credit?...Read more

Key takeaways

  • Educators can deduct out-of-pocket expenses as an income adjustment.
  • Self-employed individuals can write off business-related education expenses.
  • You can use education tax credits in 2023, like the LLC or AOTC, to lower your taxes.

Educator expenses deduction 101

Let’s start with educators. Educator is a pretty broad term, but it usually covers teachers, instructors, aides, counselors and principals who spent at least 900 hours at a state-certified public or private school. Parents who homeschool their kids aren’t eligible for this deduction. In 2022, the maximum teacher expense deduction was $300 in unreimbursed expenses. Joint filers who are both educators could deduct $600 ($300 each) in out-of-pocket expenses from their returns. But how much can teachers write off on taxes in 2023? The amount remains unchanged from 2022. Some tax-deductible expenses include:
  • Classroom supplies
  • Books used in school
  • Computer equipment (webcams, headphones) and software
  • Professional development courses
  • Athletic equipment (if you teach physical education)
  • COVID-19 protective items
You're eligible to deduct classroom expenses as long as you haven't been compensated for them. If any entity, like a school, teachers union or parent-teacher association has refunded you for the funds you spent on classroom materials, you won't be able to claim a deduction for those expenses.
Infographic entitled Who Qualifies For The Educator Expense Deduction in 2023 listing criteria to qualify for the deduction.

I’m a private tutor. Can I deduct education expenses for my business?

When is tutoring tax deductible? If you work as a tutor or provide extra help to students in your off hours, the IRS will classify you as self-employed. This means paying self-employment taxes, which is 15.3% of your earned income. As a self-employed tutor, you should report your tutoring income and any ordinary and necessary education expenses on Schedule C when filing your taxes. Private tutors can deduct business expenses regardless of whether they work in person or virtually. Are professional development courses tax deductible for tutors, too? Yes! Tutors can deduct any course costs related to improving or furthering their careers. Tutors also have to pay estimated quarterly taxes for tax liabilities over $1,000 to avoid getting an underpayment penalty. An estimated tax calculator can help you with this. There are a lot of 1099 deductions that private tutors can write off:
  • Teaching aids (workbooks, textbooks, stationery)
  • Travel expenses (if you provide in-person services)
  • Home office (if you work from home)
  • Office supplies
  • Subscriptions (podcast, tech, magazines)
FlyFin’s A.I. can help self-employed individuals maximize their deductions by finding every business write-off. Built-in tax calculators help calculate estimated tax payments and self-employed tax, while CPAs offer tax preparation and filing support to make 1099 taxes stress-free.

Is there a private school tax deduction?

Wondering if you can cut down those school tuition bills and give your wallet a break on taxes? When it comes to your children's school education, the answer is often a resounding "no." The IRS usually doesn't allow you to write off the money you shell out on tuition from kindergarten through 12th grade. Children in private schools also cannot claim this tax deduction. There is another way to get a tax break without the private school tax deduction. You can put money into a tax-friendly educational savings account (ESA) that can help pay for certain expenses. There are two types – 529 Education Savings Plan and Coverdell Education Savings Account. A 529 plan allows you to deduct up to $10,000 per student for qualified tuition expenses paid in 2023. The money becomes taxable if you use it for any other expense. A Coverdell Education Savings Account helps cover school expenses like:
  • Textbooks
  • Tuition
  • Other required supplies
Every year, you can take out a tax-free amount of up to $10,000 per student from these accounts to cover these costs. However, it's important to keep in mind that there are some limits to the tax advantages associated with contributing to a Coverdell ESA. Your contribution is limited to a maximum of $2,000 a year for each beneficiary.
 Infographic entitled Save On Education Expenses With ESAs listing two ways to cover school expenses that aren’t tax deductible.
In certain situations, you might have to dial down your educator expense deduction. This happens when you've benefited from some special tax-free perks. For instance, if you've earned tax-free interest on US savings bonds because you used that money for higher education expenses, received distributions from 529 plans that weren't taxable or made tax-free withdrawals from Coverdell education savings accounts, your deduction could be affected.

Is college tuition tax deductible in 2023?

Typically, you can't just write off your college tuition as a tax deduction. This is a change from the tuition and fees deduction, which no longer exists in 2023. Basically, there was a special rule in place leading up to 2020 that allowed individuals to deduct higher education tuition costs from their taxable income. In fact, taxpayers could deduct up to $4,000 in tuition expenses in 2020. So, is there any way to get a tax break without the tuition and fees deduction in 2023? Yes, with the help of tax credits, which we’ll talk about later. But, self-employed individuals who are continuing their education can claim the education expenses tax deduction. So, what college expenses are tax deductible in 2023?
  • College tuition
  • Travel expenses (course-related)
  • College supplies
  • Textbooks
  • Typing costs
  • Research expenses
  • Industry magazine subscriptions
This deduction is not just limited to college degrees. Say you're a freelance artist. You're always looking to improve your skills and stay up-to-date with the latest trends, so you decide to take a series of online courses and workshops related to illustration. You keep records of the course fees, online class materials and any other expenses associated with your professional development. When it's time to file your taxes as a self-employed individual, you write off these training expenses as business expenses as they were directly related to your work and help you enhance your drawing skills. As a result, this deduction reduces your SE tax liability.

Are college application fees tax deductible?

As per the IRS rules, college application fees are not tax deductible. However, self-employed individuals going to college and majoring in a degree directly related to their business can deduct college tuition from their taxes. By the way, the IRS won't let you deduct educational expenses if they're just helping you meet the basic requirements for working in a new field. So, a freelance writer can’t write off a cooking course that will help them pivot to becoming a chef.
Infographic entitled When Can I Write Off Continuing Education On My Taxes showing how to claim the college tuition tax deduction in 2023.

Education tax credits

Apart from tax deductions, self-employed individuals and regular taxpayers can use education tax credits to lower their own, spouse or dependent’s education expenses. A tax credit is different from a deduction as it lowers the owed tax amount rather than taxable income. However, these credits can only be used for qualified expenses, and you can only choose one per year. What doesn't make the cut as qualified expenses? Typically, costs like insurance, medical expenses, transportation, and living expenses aren't considered eligible school expenses for education credits. Similarly, courses that don't lead to college credit usually don't count as qualified education expenses unless they're part of a degree program.
Infographic entitled Taxes And Licenses on Schedule C listing expenses that are reported on Line 23.

The Lifetime Learning Credit

The Lifetime Learning Credit (LLC) is a non-refundable tax credit that helps taxpayers pursuing higher education, whether it's an undergrad, postgraduate or professional course. There are a few rules to qualify for this credit:
  • You need to be pursuing a course at an eligible institution
  • The course must help you gain a degree or improve your job skills
  • You must have already been enrolled for one academic period in the tax year the credit is claimed
  • Your MAGI (Modified Adjusted Gross Income) has to be lower than $90,000 if you’re a single filer ($180,000 for joint filers)
  • You must receive a Form 1098-T to claim the credit
The maximum credit amount you can claim is $2,000. If your MAGI is between $80,000 and $90,000 as a single filer (between $160,000 and $180,000 for joint filers), the credit will start to phase out. You can use any sort of lifetime learning credit calculator to find your amount or ask a tax pro for help. There is also no limit on the number of years you can use this credit, but you cannot claim it if you’re listed as a dependent on someone else’s tax return.

The American Opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) is quite different to the LLC. For one, it allows you to claim up to $2,500 per student. Its usage is also limited to four tax years. To claim the AOTC, you’ll need to:
  • Receive Form 1098-T
  • Be pursuing a degree at an eligible institution
  • Not have finished the first four years of your higher education
  • Have a MAGI less than $90,000 as a single filer ($180,000 for joint filers)
This credit is only applicable for qualified tuition and college expenses. In 2023, the credit is also partially refundable, unlike the LLC. If the credit reduces your tax liability to zero, you may be eligible to receive a refund of 40% of the surplus credit amount, up to a maximum of $1,000.

How can I claim the education expenses tax deduction and tax credit?

If you’re an educator, you can claim the education expenses tax deduction as an income adjustment on Schedule 1 (Form 1040). Self-employed individuals will report their deductible expenses on Schedule C. For the tax credits, you’ll need Form 8863. Gathering the right documentation is a crucial step in claiming education-related deductions and credits on your tax return. You have to keep:
  • Receipts for tuition payments
  • Receipts for qualified expenses
  • Records of qualified expenses
  • Form 1098-T (if applicable)
  • Receipts for out-of-pocket expenses (for educators)
  • Previous year’s tax returns (if this is not your first time claiming a tax credit)
  • Enrolment status at your institution
  • Income information
  • Banks statements
  • Canceled checks
When you hang on to all the paperwork you need, you're setting yourself up to easily claim the deductions and credits that are rightfully yours. Plus, it's like having a protective shield against any troubles that might pop up during an IRS audit.

Office Supplies Tax Deduction

Office supplies are tax deductible for self-employed individuals and can be reported under the office expenses category on Schedule C.

Phone Tax Deduction

Cell phones can be a business tax deduction for self-employed individuals if it is an ordinary and necessary expense. A separate business cell phone can be fully written off.

Advertising Tax Deduction

Ordinary and necessary promotion expenses and marketing expenses are tax-deductible for self-employed individuals. They should be claimed on Schedule C when filing 1099 tax.

Business Insurance Tax Deduction

Self-employed individuals can deduct business insurance expenses from their 1099 taxes. Sole proprietors and single-member LLCs can claim it on Schedule C.

Meals Tax Deduction

The meals and entertainment deduction in 2023 allows 1099 workers to deduct 50% of business meal costs. Certain meal and entertainment expenses are still fully deductible.

Business Travel Tax Deduction

Expenses related to traveling are deductible for business purposes. A per diem rate is set for deductible travel expenses.

Charitable Contribution Tax Deduction

If you make a charitable donation to an organization, it might count as a tax deduction. Not all charitable donations count as a write-off.

Clothing And Accessories Tax Deduction

Self-employed individuals can take the clothing tax deduction if their clothes cannot be worn outside the work environment.

Commission And Fees Tax Deduction

Self-employed individuals can claim certain commissions and fees as tax deductions if they are related to their business and are ordinary and necessary.

Contract Labor Tax Deduction

If you do any contract labor, you will have to pay contract labor taxes, also known as SE tax. Estimated payments quarterly need to be made for tax liabilities over $1,000.

Internet and WiFi Tax Deduction

Self-employed individuals can deduct some of their internet bills if they work from home as part of the home office deduction. Internet costs can also be reported on Schedule C.

Medical and Dental Tax Deduction

Certain dental and medical costs can be claimed as a medical tax deduction if itemized when paying income taxes. Expenses have to be more than 7.5% of AGI.

Rent Tax Deduction

Rent is tax deductible for self-employed individuals who work from home or have a separate office space. Some states offer renters tax credits to lower state taxes.

Repair and Maintenance Tax Deduction

Capital improvements can be claimed as a tax deduction through depreciation. Repairs to rental properties can be claimed as a business expense.

Professional and Legal Services Tax Deduction

Legal fees are tax deductible from 1099 taxes under the legal and professional fees category on Schedule C. The category also includes consultant and tax prep fees.

Shipping Tax Deduction

Business-related shipping expenses are tax-deductible. Shipping supplies and the cost of shipping are included as write-offs.

Software Tax Deduction

Software depreciation can be claimed with the straight-line method, Section 179 or through amortization. Report software depreciation on Form 4562.

Student Loan Payment Tax Deduction

Student loan interest paid is tax-deductible, and every type of education loan qualifies for the deduction.

Taxes and Licenses Tax Deduction

Self-employed individuals can take the license fee tax deduction on taxes and licenses that are ordinary and necessary business expenses.

Utilities Tax Deduction

Utilities are tax deductible when they are an ordinary and necessary business expense. They can be claimed with the home office deduction or as a rental property deduction.

Vehicle Insurance Tax Deduction

Interest on a car loan is tax deductible if it is used for business. Choose between the standard and actual method when claiming the vehicle deduction.

Vehicle Purchase Tax Deduction

You can claim the vehicle tax write-off if you’re self-employed and use your vehicle for business. It can also be taken if you lease your vehicle.

Mortgage Interest Tax Deduction

The mortgage interest deduction can be claimed by homeowners who itemize their expenses. You could claim the mortgage interest tax credit if you’re in a lower tax bracket.

Office Supplies Tax Deduction

Office supplies are tax deductible for self-employed individuals and can be reported under the office expenses category on Schedule C.

Phone Tax Deduction

Cell phones can be a business tax deduction for self-employed individuals if it is an ordinary and necessary expense. A separate business cell phone can be fully written off.

Advertising Tax Deduction

Ordinary and necessary promotion expenses and marketing expenses are tax-deductible for self-employed individuals. They should be claimed on Schedule C when filing 1099 tax.

Business Insurance Tax Deduction

Self-employed individuals can deduct business insurance expenses from their 1099 taxes. Sole proprietors and single-member LLCs can claim it on Schedule C.

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