Credits & Deductions! There are still many credits and deductions available that the Tax Cuts
and Jobs Act did not affect. To help you get organized and not miss a credit or deduction, we are
highlighting some key items to help you get a bigger refund. If you should have any questions or
need further explanation, please do not hesitate to call us.
Tax Breaks for Education – There are four major education tax breaks for 2019.
Tuition and Fees Deduction – The Tuition and Fees Deduction has been extended to cover qualified
education expenses paid in 2019 and 2020. You may be able to deduct up to $4,000 of the qualified
tuition and fees you paid in 2019 for yourself, your spouse, or your dependents. However, you
cannot take this deduction if you can be claimed as a dependent on someone’s tax return or if you
claim an Education Credit for the same student. The Tuition and Fees Deduction begins to phase out
after your modified AGI reaches $65,000 ($130,000 for MFJ) and is completely phased out after
your modified AGI reaches $80,000 ($160,000 for MFJ).
Interest on Education Loans – Interest paid on education loans will be deductible, subject to
limitations ($2,500 max in 2019). The limit on the deduction will be reduced after your modified
AGI reaches $70,000 ($140,000 if MFJ) and will be gone after your modified AGI reaches $85,000
($170,000 if MFJ). Married filing separately returns do not qualify.
American Opportunity Credit – This Credit allows you to claim a maximum credit of $2,500
(100% of the first $2,000 and 25% of the next $2,000 of qualified education expenses). The credit is
available for the first four years of postsecondary education, and 40% of the credit is refundable for
most taxpayers. The American Opportunity Credit begins to phase out after your modified AGI
reaches $80,000 ($160,000 for MFJ) and is completely phased out after your modified AGI reaches
$90,000 ($180,000 for MFJ). The student must be enrolled in a program that leads to a degree,
certificate, or other recognized educational credential and is taking at least ½ of the normal full-time
work load for his or her course of study for at least one academic period during the calendar year.
Qualified education expenses include tuition, enrollment fees, and course-related books, supplies and
The Lifetime Learning Credit – This credit allows you to claim a maximum credit of 20% of the
first $10,000 you pay for qualified expenses for all students in your family. The Lifetime Credit is
not based on workload, nor limited to the first four years of postsecondary education, and there is no
limit on the number of years for which the credit can be claimed. The Lifetime Learning Credit
begins to phase out after your modified AGI reaches $58,000 ($116,000 for MFJ) and is completely
phased out after your modified AGI reaches $68,000 ($136,000 for MFJ).
Only one education credit or a tax-free withdrawal from an education IRA can be taken per student
per year. In addition, only the person claiming the student as a dependent can claim the higher
education credit for a student’s expenses.
Education Savings Accounts (ESAs) – You can make nondeductible contributions of up to
$2,000 per year into a special IRA to pay the educational expense of a designated beneficiary who is
currently under the age 18. The maximum amount that can be contributed each year begins to phase
out at a modified AGI of $95,000 and is phased out completely at $110,000 ($190,000 to $220,000 if
MFJ). Earnings on distributions will be distributed tax free, provided that they are used to pay the
beneficiary’s postsecondary, elementary or secondary education expenses. In addition, qualified
expenses can include room and board if the student is enrolled at least half-time. Hot: You can take
a tax-free distribution from an ESA and claim an American Opportunity Credit or Lifetime Learning
Credit as long as the same expenses are not used for both benefits.
Health Insurance Deductions – For 2019, the part of your self-employed health insurance
premiums that you can deduct as an adjustment to income is 100%. The deduction cannot exceed
the profit derived from the self-employed business. In addition, no deduction is allowed for any
calendar month for which the taxpayer is eligible to participate in any subsidized health plan
maintained by any employer of the taxpayer or of the taxpayer’s spouse.