While so many of us are thrilled the kids are going back to school, we often are blown away at how expensive it has become to educate them!
After we pay for books, school supplies and PTA fees, there's not much left.
And if your kid is in parochial or private school, you're even worse off, because neither the tuition nor those often-hideous school uniforms are tax deductible.
But all is not lost. Schooling the rugrats actually can save you some money next April. So read on because below are eight things that could help bring down your ever-growing tax bill.
1. Before and After School care.
If you have to pay someone to watch your kids before or after school so you can work, those costs may be deductible as part of your child and dependent care credit. So keep track of those child care expenses for your dependent kids under 13. "That includes after school activities, like dance classes and sports clinics if you are still working during those times," says Lisa Greene-Lewis, CPA and tax expert at TurboTax.
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2. Volunteering for School Fundraisers
Anyone with a kid in grammar school knows that you could wallpaper a room with the fundraising forms that come home each night!
But don't throw them all out because some of your generosity may be deductible. Keep track of the things you donate. Whether you make cookies for the bake sale or pay those incessant parent-teacher association fees, that stuff is all deductible as part of your charitable contributions.
Also include those classroom fees and the fundraising picnic you help throw for your kid's softball team, says Greene-Lewis. Save those receipts!
3. Funding a Coverdell Education Savings Account (ESA).
A Coverdell ESA is much like a 529 plan (which we'll get to in a minute), but with an ESA, you can use the tax-free withdrawals to pay for K-12 expenses (A 529 plan is just for higher ed). The biggest downside is that the maximum annual contribution to a ESA is only $2,000 per kid. But if your private school tuition is $10,000, that at least covers 20% of it.
You also can use the money for books, laptops, etc. during grammar and high school.
4. Teachers Can Deduct Out-of-Pocket Costs
If you are an educator in grades Kindergarten through 12th, save your receipts every time you spend your own money for classroom materials.
While it's not a lot, you are entitled to a $250 deduction for all your out-of-pocket costs. And that goes right on line 33 of your Form 1040, so you don't even need to itemize your deductions to qualify for it.
5. Save For College Already!
As we mentioned above, 529 plans are one of the best ways to save for college.
While there isn't a tax break on up front, you may get a deduction for your contribution at the state level so be sure to check.
But in the future, the money is withdrawn tax-free when used for school expenses -- like tuition, room and board and books.
And reach out to Grandma and Grandpa; they can contribute to your kid's plan too. The more the merrier!
Check out this IRS link with all the tax grist on these plans.
6. Deduct That Student Loan Interest
The interest on those student loans can add up fast so be sure to take advantage of the student loan interest deduction. If your adjusted gross income (AGI) is less than $160,000 for a married couple filing jointly or $80,000 as a single person, you can deduct up to $2,500 of student loan interest paid each year. Again, better than nothing.
7. Utilize the Education Credits.
If you, your spouse, or dependent is attending college or graduate school starting this fall, you may qualify for an education credit.
The American Opportunity Credit of up to $2,500 is limited to the first four years of higher education and 40% of the credit is refundable. That's $1,000 back from Uncle Same even if you don't have a tax bill. The AGI limits are $160,000 or less for married couples filing a joint return or $80,000 or less but check the IRS site for more details.
The Lifetime Learning Credit of up to $2,000 is for any higher education; no portion is refundable. The AGI limit is $131,000 for married folks and $65,000 is single but again, check the IRS site for more details.
8. Consider Making Junior an Adult
If your AGI is above the limitations on the credits above and Junior has a job where federal taxes are taken out, maybe it's time you give up the $4,050 dependency deduction and let him file on his own and take the credits on his own personal tax return, suggests Greene-Lewis.
This requires a little number crunching but if it brings more money back into your house come tax time, then it may be worth it.
Even better, your family has a better shot of getting that $1,000 refundable amount back from the American Opportunity Credit if he files as a single, suggests Greene-Lewis.
So borrow your student's calculator, crunch some numbers, save some receipts and make sure you benefit a bit from all the money you're investing into your kid's future.