School has started. As a kid, this probably filled you with more than a bit of dread. As a parent, it might be a sweeping sense of relief (Don’t worry, we’re not here to judge!). Regardless, in most schools across the country, class is back in session—and it’s time to put Summer 2018 in the books. So it’s time to crack open up the book of back-to-school tax tips.
If you’re a parent, the busy summer months can add up. Between summer vacations, camps, classes, and maybe even some home repairs, it’s almost a guarantee that you’ve dug into your pocketbook or savings at some point. Now is the perfect time to figure out where you spent, where you overspent, and what you can do to save for next summer.
However, you might be missing some savings you didn’t even know about! There are a number of back-to-school tax deductions that can amount to thousands of dollars on your taxes and a nice refund check next summer. Now is the time to stop leaving money on the table and start cashing in on summer and back-to-school saving.
With that in mind, we’ve outlined three of the best back-to-school tax deductions for parents you may—or may not—know about.
If you’re a parent, you have opportunities to save at every age of your child’s life, even after they’ve left for college. We’ve outlined an awesome tax tip that you can take advantage of for every age group: early elementary, high schoolers, and college students.
It’s time to break out the Flexible Spending Account.
If you don’t know, a Flexible Spending Account (FSA) is an account where you can put money to pay for certain out-of-pocket costs. Because it’s untaxed, you’re essentially saving the amount you would have paid on the money in your FSA.
Dependent-care FSAs are actually offered by a majority of employers, which you can use to pay for childcare during the summer months. This includes a nanny, day care, a babysitter—and even day camp! The IRS-set contribution limit for FSAs in 2018 is $5,000 per family if you’re filing jointly, which can mean big savings just for making sure your rugrats are looked after during the summer!
If your teenager some of their summer time working a summer job, your whole family may be able to save.
At most summer jobs, your teenager will complete a W-4, letting their employer know how much they want withheld for state and federal income taxes. On this form, they can also claim an exemption from federal withholding—if they don’t think they’ll make more than the standard deduction limit. In 2018, that maximum is $12,000.
If your teenager isn’t planning to continue working through the fall, or has hours through the fall that will ensure their 2018 income total is lower than the standard deduction limit, they won’t need to pay income tax. Zero taxes? Now that’s a dream job.
We may not be able to help with the empty nest, but if your teenager just left for college, we can point you toward some massive tax deductions.
There are loads of tax credits you can benefit from as a parent with a college-bound child. Fortunately, you may even be able to take advantage of them well into your child’s four years at an institution of higher learning! The American Opportunity Tax Credit, or (AOTC), can be used for up to four years and can be used on tuition, enrollment fees, and school materials.
Meanwhile, the Lifetime Learning Tax Credit is fair game (with some income and filing status qualifications) for anyone who has paid fees or made tuition payments to a school after high school. You don’t even have to be working toward a degree!
Finally, if you or your student has taken out loans to pay for college and is attending at least half time, you can deduct interest payments. When you have a lot in loans, this interest can add up—which means your savings can, too. You can reduce your taxable income up to $2,500!
As a parent, there are plenty of back-to-school tax tips you should know so you maximize your refund next year. Regardless of your child’s age, make sure you know the potential tax credits your family qualifies for. Keep a record of your summer spending, talk with your child about their summer savings strategies, and start seeking out the tax credits that may apply to you once your teen heads out for the best four years of their life.
Sure, we’re sad to see summer go. But we’ll always remember the good times—and the savings.