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Top education-related tax tips.
Save money and avoid trouble with the IRS.
 

As we enter the final few weeks of the school year, with crushing student loan debt and the rocketing costs of education at all levels making headlines and policy debates, here is a list of education-related tax tips. Some will save you money – and others will save you trouble with the IRS.

  • School uniforms are not deductible, even if they are required. Moving expenses for college are not deductible. The cost of private or parochial school tuition isn't deductible either. However, if you can separate the educational costs from the child care component of private school tuition, those costs may be deductible for children up to the age of 13.

  • For a child up to the age of 13, the cost of before- or after-school care may be deducted if it is a qualifying expense.

  • Tax deductions for school fundraisers are limited. Among other things, you are required to reduce your deduction by the market value of any goods received in return for your charitable donation.

  • The earnings in 529 plans are NOT taxable for federal purposes. The money grows tax-free and withdrawals are not taxable as long as the money is used for eligible college expenses.

  • You can use tax-deferred accounts (i.e., an Educational Savings Account) to pay for qualified educational expenses including books and computers, for elementary, high school and college expenses.

  • The American Opportunity Credit can amount to $2,500 in tax credits per eligible student and is available for the first four years of post-secondary education at a qualified education institution. Up to 40% of the credit is refundable, which means that the taxpayer may be able to receive up to $1,000, even if they have no tax liability. Eligible expenses include tuition at an eligible institution, books and required supplies, but not room and board, medical expenses, insurance, etc. Income limits apply.

  • Lifetime Learning Credit can be worth up to $2,000 for qualified education expenses paid for a student enrolled in an eligible educational institution. It is a non-refundable credit of 20% of a maximum $10,000 in qualified education expenses. There is currently no limit on the number of years a taxpayer can claim the Lifetime Learning Credit for an eligible student. Income limits do apply, however.

  • There is a student loan interest deduction of up to $2,500 for paying interest on a student loan (also known as an education loan) used for higher education. The amount of the student loan interest deduction is gradually reduced (phased out) if the taxpayer’s modified adjusted gross income is within a certain range.

  • The tuition and fees deduction applies to qualified education expenses for higher education on an eligible student. The deduction gradually phases out over a certain income range until no deduction is allowed. The deduction is available for one or more qualified courses and there is no limit to the number of years the deduction can be claimed.

TOP 10 TAX SCAMS
 

  • Aggressive and threatening phone calls from criminals impersonating IRS agents, threatening potential victims with arrest, deportation and just about everything else to obtain personal financial information. 

  • Tax-related identity theft. 

  • Hiding money or income offshore. 

  • Making claims on tax returns that aren’t supportable. 

  • Groups and individuals masquerading as charities to attract donations that go straight into their pockets. 

  • Filing phony information returns, like 1099s or W-2s, or other fake documents, in an attempt to lower taxable income. 

  • Abusive tax shelters and complex tax avoidance schemes. 

  • Dishonestly inflating income to maximize refundable credits.

  • Excessive claims for Fuel Tax Credits.

  • ​Frivolous arguments that to try to avoid paying any taxes at all.

 Here are the top 10 ways we have helped clients reduce costs and increase profits.


1. Buy More Carefully
Buy in smaller quantities and negotiate lower prices. When suppliers are hungry for business (especially from companies that pay on time), you'll be surprised at how many will lower prices, if you ask and don't take no for an answer.

2. Eliminate Discretionary Spending
If you were planning on painting your building, buying new equipment, or hiring additional employees, wait.
 
3. Look for a Cheaper Credit Card Processing Service
If you take credit cards, chances are that you pay your processor too much, giving up cash you desperately need.
 
4. Stop Paying for Equipment You Don't Need
Take a hard look at everything you own, especially items you're still paying for. Sell everything you don't need. If you are leasing equipment you don't absolutely need, ask the leasing company to renegotiate payments or cancel the lease in exchange for taking back the equipment.
 
5. Renegotiate Your Lease/ Sublet Unneeded Space
If the economy has caused tenants in your area to be thin on the ground and your lease will be up for renewal soon, chances are good that if pushed, your landlord will give you a better deal. Even if you have a long-term lease, try to renegotiate. If your business downsizes, rent out unused space if your lease allows it (you may need to obtain your landlord's prior consent).
 
6. Cut Employee Perks
After you've cancelled extras -- from company-paid cars, parking spaces, and club dues to the daily newspaper and bottled water -- examine every other check your business writes. Even when cuts are more symbolic than significant, working hard to chop every possible expense sends an important message to everyone associated with your business that you are determined to do what it takes to survive.

7. Increase Marketing, Cut Costs
When sales drop, you need to increase your marketing outreach. But it's not usually cost-effective to do this by paying for expensive advertising or other high-cost techniques. Instead, your cash preservation strategy should usually dictate relying on low-cost guerrilla marketing efforts that, among other techniques, enlist your loyal customers in helping rescue your business.
 
8. Cut Business Travel
Assuming your business still does a significant amount of travel, cut it at least in half. Just committing to this will force you to focus on eliminating the least profitable half.
 
9. Cut Printing Costs
Businesses typically print far too many copies of far too many pieces of paper with the result that lots end up in the trash. And consistently printing too much isn't the only money-eater; lots of businesses pay far too much even when they print exactly what they need.
 
10. Cut Back on Insurance Expense
By increasing deductibles and cancelling less essential coverage for things like business interruption or the death of a key employee, you may be able to reduce your overall payments.

Need help addressing areas critical for business success and growth?

 

1. Managing cashflow

Cashflow is one of the most important things you have to manage well to succeed in business. Small businesses need to get accounts receivable monies in on time because they will be quickly paying them out to cover cost of goods and overhead.

How we can help: We can help track your business cashflow and help you assess how the business is performing. We can help you understand the ebbs and flows of your business activity and what is normal and what might be cause for concern.

2. Are you marking up your Cost of Goods enough?
Whether you’re a products or services based business, you have to understand what the cost of goods is for what you sell and make sure that there is enough markup between what it costs you and what you’re selling it for to cover the overhead of your business and make your business profitable.

How we can help: We can help look at your business to make sure that you’re making enough markup to cover your overhead expenses or that you have high enough volume to sustain your business.

3. Growing your business
Most business owners want to grow their businesses. It’s an investment that you want to support you into retirement, either through profits generated by the business or the sale of the business. Growing a business doesn't just happen by accident: as the business owner you have to commit to continuously finding more and more customers or offering new products and services.
Often you need to get a bank loan or line of credit to support your growth plans.

How we can help: We can help make sure your business books are in order to withstand the scrutiny of the lender and can also help make sure that your business is growing as expected once you do launch into that growth phase.

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