Most Overlooked Deduction 2008 AND 2009

As we’re preparing this year’s tax returns, we’re again finding we have to contact people for more information when there are students in the family. They’re forgetting that the Southern half of Wisconsin is located in a Federally Declared Disaster Area, and that we have this big education tax credit or deduction that applies only to 2008 AND 2009 for the Hope Credit. 

For the New American Opportunity Credit, more than just tuition costs qualify in calculating the credit. 

This year and last year’s biggest overlooked tax deduction: including ROOM and BOARD AND SUPPLIES (THAT LAPTOP COMPUTER!) with tuition for the education deduction or tax credit, for students attending schools full time in the Midwest Disaster Area in 29 Wisconsin Counties:

Adams, Calumet, Columbia, Crawford, Dane, Dodge, Fond du Lac, Grant, Green, Green Lake, Iowa, Jefferson, Juneau, Kenosha, Lafayette, Marquette, Milwaukee, Monroe, Ozaukee, Racine, Richland, Rock, Sauk, Sheboygan, Vernon, Walworth, Washington, Waukesha and Winnebago Counties.

If you attend school in a Federally Declared Disaster Area you get double the Federal Hope and Lifetime Education Credits. And, the definition of qualified tuition and fees has been changed to include room/board and supplies, just like is allowed under Section 529 Plans.

Qualified expenses include the following when required for enrollment or attendance at an eligible educational institution:

o Tuition

o Fees

o Supplies (books, computer software)

o Equipment (i.e., laptop computer)

o Room and board for students enrolled at least half-time in a degree or certificate program. Expenses are limited to the room and board allowable included in the cost of attendance set by the school for financial aid purposes or the actual cost of campus housing, if greater.

Students attending UW-Milwaukee, Madison, Whitewater, LaCrosse, Oshkosh, Platteville and the UW Extensions in the counties listed above, as well as the Technical Schools and any other schools with at least half-time attendance (8 credits) are eligible for this extra benefit to count supplies, equipment and room/board! Don’t forget to give us this information!

With the addition of the new American Opportunity Credit for 2009, with different rules, you also have the chance to use the cost of books, fees, equipment (computer) and other supplies necessary for post-high school attendance in the calculation of the credits. 

With 1099-Q distributions from a prepaid tuition plan or Educational Savings Account, we need to show how those dollars were spent for education.

So to make sure you’re taking advantage of the tax laws related to education, keep track of what monies are spent for every thing related to post-high school education and we’ll be able to calculate the optimal tax benefits from the multiple choices available.