College Expenses That Are Tax Deductible in Utah

If you are thinking of hiring an accountant in Salt Lake City to help with your tax preparation, you may have questions about deductions. Depending on your life situation, you may wonder if tuition and fees for higher education are tax deductible. The answer to that question is, mercifully, yes, at least to a point.

Here we will go over some of the basic ways that student payments may be tax deductible. While of course we hope you make good use of this advice, we caution that it is not a substitute for professional expertise tailored to the details of your personal financial situation. A skilled Utah CPA or accountant can save you a huge amount of money on your personal income taxes.

Interest tax deduction

If you made student loan payments, whether for federal loans or to a private lender, you can deduct the interest on those obligations. This deduction can reduce taxable income by up to $2500, and thus your personal tax obligation by up to $625.

Textbooks

Students are known to groan under the weight of their books, both literally and figuratively. Textbooks are the most expensive books one is likely to find on the market, and pretty much every class has one or two. Or three.

Nice to know, isn’t it, that 21 states and Washington, D.C. exempt textbooks from sales tax? Unfortunately, that only helps those going to school out of state. As a Utah CPA will tell you, Utah only exempts textbooks from schools that are tax exempt. But it’s still something to look for, depending on circumstance!

Tax-deductible tuition costs

Under current IRS rules, tuition and fees are federally deductible up to $4000 for taxpayers who make $80,000 per year or $160,000 for married couples filing jointly. Ask an accountant in Salt Lake City if you qualify!

American Opportunity Tax Credit

According to IRS rules, you can claim the AOTC for the first four years of higher education. You can lower your tax burden by up to $2500 per year by claiming qualified educational expenses, and if your burden is lowered to $0.00, receive a 40% refund of the remainder of the credit.

However, to qualify for the credit, you must be able to claim at least $4000 in educational expenses. In some cases, students are able to prepay the next semester’s tuition to qualify for this credit.

Lifetime learning credit This credit covers college-related costs that aren’t covered by the AOTC. There is no year limit on the lifetime learning credit, and the student doesn’t even need to be working toward a degree. Students can reduce their taxable income by up to $4000 per year for tuition, fees, books and other related expenses.

Liquidated investments

If you happened to sell investments at a loss to finance your education, you can write off the losses. You could even write your losses off against capital gains made on the sale of other investments. The specifics of all this get very tricky, however, so you’ll probably want to get professional assistance with this area of tax preparation.

529 account contributions

You can reduce state income tax obligations by writing off contributions to 529 educational savings accounts. This is true in Utah as it is in many other states, though you might want to ask an expert how it shakes out in your personal situation