Tax credits save directly on the amount of tax you, whereas tax deductions reduce the amount of income you have to pay tax on. And when you're on the hook to pay the IRS, tax credits can seem like little miracles, making your tax bill shrink before your eyes.
You might already be familiar with some of the more well-known tax credit programs, like the
Lifetime Learning Credit and the American Opportunity Credit, both of which you may be eligible for right now!
The IRS has some guidelines you can use to determine whether you're eligible for education deductables, but if any of this is confusing,
FlyFin's real-life CPA team can walk you through the finer points.
For example, if you’re pursuing post-secondary education, what you study has to be clearly related to your current field of work or business. So if you’ve got a catering company, go ahead and claim a
self-employment deduction for the cost of that Uzbek cooking class, but those Samba lessons and crystal healing classes you’re taking won't fly. Only courses that are required by your field for professional development are 100% deductible.
If you want to make a career switch or study something completely different from what you’re doing now for work, that’s unfortunately not deductible. And, if the course you want to pursue would give you the first qualifier into a new role, it would also not be deductible.