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Using Tax Deductions and Credits to Help Fund Your Nursing Education

2:41 AM Jamaal Solomon 0 Comments Category :


ROLL CALL......
  • Associate of Nursing, or Associate of Science in Nursing degree (ASN or ADN)
  • Nursing Diploma
  • Bachelor of Science in Nursing degree (BSN) 
  • Master of Science in nursing degree (MSN)
  • Ph.D. Nursing  degree
  •  Licensed Practical Nurse or Licensed Vocational Nurse (LPN or LVN)
  • Nurse Practitioner degree (NP)
  • Advanced Practice Nurse degree (APN).
  • Certified Nurse Anesthetist (CRNA)
  • Clinical Nurse Specialist (CNS)
  • Certifies Nurse Midwife (CNM)
  • Registered Nurse (RN)
I swear I wish that my gift to the world was for caring for others. Look at just some of the many opportunities within the nursing field. The sky is really the limit. It is quite possible that you will be in school for the majority of your professional life. Lets not even mention about continuing education costs. Wouldn't it be great for Uncle Sam to help you out with some of your educational expenses? Well good news, Uncle Sam is kind enough to help out a little. In my world, a little is better than nothing!

Here is the good and bad news about education tax deductions and credits:

The Lifetime Learning Credit

Good news: The Lifetime Learning Credit is for qualified tuition and related expenses paid for eligible students enrolled in an eligible educational institution. This credit can help pay for undergraduate, graduate and professional degree courses--including courses to acquire or improve job skills. There is no limit on the number of years you can claim the credit. It is worth up to $2,000 per tax return.

Bad news: To claim the full credit, your MAGI, modified adjusted gross income must be $52,000 or less ($104,000 or less for married filing jointly). If your MAGI is over $52,000 but less than $62,000 (over $104,000 but less than $124,000 for married filing jointly), you receive a reduced amount of the credit. If your MAGI is over $62,000 ($124,000 for joint filers), you cannot claim the credit.

The American Opportunity Tax Credit

Good news: American Opportunity Tax Credit is a credit for qualified education expenses paid for an eligible student for the first four years of higher education.You can get a maximum annual credit of $2,500 per eligible student. If the credit brings the amount of tax you owe to zero, you can have 40 percent of any remaining amount of the credit (up to $1,000) refunded to you.

Bad news: To claim the full credit, your MAGI, modified adjusted gross income must be $80,000 or less ($160,000 or less for married filing jointly).You receive a reduced amount of the credit if your MAGI is over $80,000 but less than $90,000 (over $160,000 but less than $180,000 for married filing jointly).You cannot claim the credit if your MAGI is over $90,000 ($180,000 for joint filers).


Student Loan Interest Deduction

Good news: You may be able to deduct interest you pay on a qualified student loan. Generally, the amount you may deduct is the lesser of $2,500 or the amount of interest you actually paid and it is subject to a phaseout, which means the amount of the deduction gradually decreases and phases out completely if and when your modified adjusted gross income (MAGI) amount reaches the annual limit.

Bad news:  If your modified adjusted gross income is under the threshold where the phaseout begins, then you can deduct up to $2,500 in student loan interest. If your modified adjusted gross income falls within the phaseout range, then your limit for the student loan interest deduction will be prorated or eliminated.

Tuition and Fees Deduction

Good news: You may be able to deduct qualified tuition and related expenses that you pay for yourself, your spouse or a dependent as a tuition and fees deduction.                     
     
Bad news: You cannot take the tuition and fees deduction on your income tax return if your filing status is married filing separately, or if you may be claimed as a dependent on someone else's return. If your modified adjusted gross income exceeds certain limits, your deduction is reduced or eliminated depending on your filing status. You cannot claim both the tuition and fees deduction and an American opportunity tax credit or lifetime learning credit for the same student in the same tax year. You cannot claim a deduction or credit based on expenses paid with tax-free scholarships, fellowships, grants, or education savings account funds such as a Coverdell education savings account, tax-free savings bond interest or employer-provided education assistance.

Deducting Work-Related Educational Expenses

Good news: You may be able to deduct work-related educational expenses paid during the year as an itemized deduction. To be deductible, your expenses must be for education that (1) maintains or improves your job skills or (2) that your employer or a law requires to keep your salary, status or job.

Expenses that you can deduct include:
  • Tuition, books, supplies, lab fees, and similar items
  • Certain transportation and travel costs, and
  • Other educational expenses, such as the cost of research and typing

Bad news: Even if the education meets either of these tests, the education cannot be part of a program that will qualify you for a new trade or business or that you need to meet the minimal educational requirements of your trade or business. Although the education must relate to your present work, educational expenses incurred during temporary absence from your job may be deductible. After your temporary absence, you must return to the same kind of work. Usually, absence from work for one year or less is considered temporary.      

The Ugly Truth

I simplified all of the possible educational educations. I don't want your head to explode from a tax overdose. It is highly recommended that you consult with a tax professional like myself (shameless plug) to know if you qualify.

I didn't forget about nurses that work as independent contractors. I will write a dedicated blog post for all the possible business tax deduction, which will include some educational deductions.


Jamaal Solomon, EA, MST





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