As the new school year begins around the country, students and educators may benefit from these money-saving programs and opportunities. Educators should note, that in 2022, the maximum deduction for educator expenses has risen to $300. College students should study up on two tax credits: the American Opportunity Tax Credit and the Lifetime Learning Credit. Specific to Connecticut residents, the Connecticut Higher Education Trust (CHET) is a state-sponsored, tax-advantaged 529 college savings plan that helps families and individuals plan the costs of higher education.
Educator Expense Deduction
The IRS allows teachers and other educators to deduct up to $300 out-of-pocket classroom expenses for 2022 when they file their federal income tax returns next year. The special educator expense deduction was enacted in 2002 and has since had a deduction limit of $250 per year. This is the first year the annual limit has been increased and it will rise in $50 increments in future years to accommodate inflation adjustments. If an educator is married and filing jointly with another educator the limit rises from $300 to $600, but not more than $300 per spouse.
Educators can claim this deduction even if they take the standard deduction. Anyone who is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in a school for at least 900 hours during the school year is eligible. Both public and private school educators qualify.
College Student Tax Credits
Higher education can be pricey. Taxpayers who paid higher education costs for themselves, a spouse, or a dependent may be eligible for two tax credits.
The American Opportunity Tax Credit is available for students pursuing a degree or other recognized educational credit. Credits are available for the first four years at a post-secondary or vocational school. The maximum benefit is $2,500 per eligible student and is partially refundable, so taxpayers may get up to $1,000 back. Visit the IRS website for more information on the AOTC.
The Lifetime Learning Credit is available for all years of postsecondary education and for courses to acquire or improve job skills. It is available for an unlimited number of tax years and taxpayers can receive up to $2,000 per tax return, per year. Visit the IRS website for more information on the LLC.
Taxpayers can use the Interactive Tax Assistant tool to figure out if they’re eligible for either of these credits.
CHET College Savings Program
If enrolled in the CHET program, individuals can save money that can later be used at accredited colleges and universities across the country. CHET offers state and federal tax-free earnings and withdrawals on qualified higher education expenses. Connecticut families who are enrolled in the CHET program can receive up to $10,000 in state income tax deductions on contributions made to their CHET account. The deduction limit for single filers is $5,000. CHET offers performance details and different strategy options based on your specific investment goals and there is no annual fee or minimum required to open an account. For more details on how to open an account visit https://www.fidelity.com/529-plans/connecticut.
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