By State Representative Dean Urdahl
April 15 is right around the corner and now is a good time to get started on your tax returns, if you haven’t already. For those of you with children in school, or if you are taking college courses, it is important to be aware of the tax advantages that you may qualify for.
Back-to-school expenses can add up pretty fast, especially for families with more than one child in school. By taking advantage of the Minnesota education tax credit, parents can claim up to $1,000 per child and $2,000 per family for common school expenses (excluding tuition) for children from kindergarten through high school. Any family with a taxable income under $37,500 who pays Minnesota income tax is eligible and does not have to itemize to get the credit.
Minnesota also offers a tax subtraction for all families, regardless of income, that can be used to subtract up to $1,625 for children each year through sixth grade. Including tuition, the tax subtraction covers a wide array of expenses such as textbooks, tutoring, enrichment programs and educational software for your home computer. Both the tax credit and the tax subtraction are valuable benefits for families and I encourage parents to look into what they can save in taxes using these great programs.
Other costs you might not think of also qualify. Costs such as music or dance instructor fees, tutoring costs, and study habits coaching are eligible for deductions and credits. Summer school classes used to meet normal year requirements also qualify.
The tax benefits of education aren’t limited to parents; college students can make the most of their education, too. The Hope Credit, a federal program, allows students who pay taxes to deduct 100 percent of the first $1,000 they spend on education and 50 percent of the next $1,000 for each of your first two years of school. That savings, potentially $3,000, can go along way for students working their way through college.
The Lifetime Learning Credit, another federal program, allows college students to deduct 20 percent of the first $10,000 spent on post-secondary education. Unfortunately, a student can’t do the Hope Credit and the Lifetime Learning Credit at the same time, so a little work is required to determine which is the best option for each student’s situation.
If you’re out of school and paying off those student loans, don’t worry - we haven’t forgotten you. You can deduct, up to $2,500, the interest you pay on all your student loans for the year.
If you would like help on your taxes regarding education credits or deductions, visit www.pcemn.org – the website for the non-profit Partnership for Choice in Education. The website has the resources to help you decide what you qualify for and how much you can deduct. For more general tax information, visit www.taxes.state.mn.us or www.irs.gov.