Accountants only: please answer this question!?

Question

Assuming the fact that you are single.

Scenario #1 : If you are in 55k’s income bracket and you take a certificate course, which cost you, $1200.00 (you pay out of your pocket) would you get educational credit tax break when you file your tax? If yes then up to how much you will be reimburse?

Scenario # 2: As a single (no dependents) will you pay more tax if you dont take certificate course?

Please reply. Your time and help is greatly appriciated!

PepsiLime Please answer my question! I like your advice. Thank you

Answer 1

Certificate course might be a bit tricky. Education credits are supposed to be for students pursuing college or graduate degrees or vocational training, so not certain if certificate course would qualify. Obviously if the certificate is give by a college, then it would qualify.

Scenario #1 - Hope credit is credit of 100% of first $1,100 of qualified tuition expenses and a 50% for the second $1,100 of qualified tuition expenses, so the maximum would be a credit of $1,650, but in your case it would be $1,150 (100% of first 1,100 and 50% of the next $100 in your case). Lifetime Learning credit is 20% of first $10,000 of tuition, so in your case it would be a credit of $240. Tuition and fees deduction is maximum of $4,000 and would depend on your tax bracket as to how much it would effect your taxes.

Scenario #2 - Yes you will pay more tax if you don't take certificate course (as long as it qualifies you for education credits), but you also won't be paying out of your own pocket the cost of the certificate program. You'd get back some/most of the certificate cost, but you wouldn't get back 100% of the cost under any circumstances.

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Answer 2

An accountant is an expert in accounting; an Enrolled Agent is an expert in taxes. I’m not sure I should have gone to the trouble of trying to answer you question since I’m not an accountant.

If your modified adjusted gross income is 55,000 or higher you are not eligible for the Hope or Lifetime Learning Credit. So the only tax benefit for you would be the tuition and fees deduction.

1
Total income 55000
- T&F deduction 1200
= AGI 53800
- standard deduction 5350
- personal exemption 3400
= taxable income 45050
Tax 7687

2
Total income 55000
AGI 55000
- standard deduction 5350
- personal exemption 3400
= taxable income 46250
Tax 7987

You will save at least $300 by going back to school. If your AGI is between 45,000 and 50,000 you have to do a worksheet to see the savings for the Hope credit or Lifetime Learning credit.

Answer 3

A course that improves your skill in your existing job field is eligible for an education deduction. So if you are an accountant and take a course to get certified in new revisions to the tax code that counts as qualified education expense. However if you are an accountant and want to be a registered nurse and take a course to get certified in new anesthesia techniques that will be considered an attempt to get a job in a different field and will not be considered qualified.