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The training courses you pay for personally may have a federal tax benefit for you in 2005 (and in some past years, as well). If you are thinking of acquiring some new skills or polishing some old ones, you might want to look into this possible tax benefit. Uncle Sam may help you a bit.
During the course of a career many professionals, on the job or between jobs, take training courses to acquire or improve job skills. Uncle Sam has recognized the need for people to engage in the learning process throughout their lives, and so has written into the Tax Code the Lifetime Learning Credit. This is a credit, as opposed to a deduction, and as such has the effect of lowering your tax bill directly, rather than just lowering your taxable income.
The IRS Rules
If you have taken a course at an eligible educational institution, you may be able to take a credit of up to 20% of the first $10,000 of education expenses. (Education expenses are defined as tuition, fees and other related expenses required by the school as a condition of enrollment.) Note that you do not have to be pursuing a degree to be eligible; an “eligible educational institution” can be a college, university, vocational school, or other legitimate postsecondary educational institution. That’s $2,000 of credit that may be yours just for taking the initiative to expand your job skills.
Not a bad deal, but, as usual with tax matters, there are limits. The amount of education credit is gradually reduced if your income drifts too high (between $87,000 and $107,000 if you file a join return). And, of course, any expenses which have been reimbursed by your employer can’t be double counted, as well as any expenses you’ve already claimed as a business expense.
The IRS Forms and Directions
Get all the rules on this and other education credits and deductions by downloading Tax Benefits for Education (2005 returns) Publication 970 at www.irs.gov. The tax form to complete to get the Lifetime Learning Credit is Form 8863.
If you live in the areas affected by hurricanes Katrina, Rita, or Wilma, check out the IRS Publication 4492 which will have information on expanded education credits available in these hurricane-affected areas.
©
Copyright 2006 Harry Collias. All rights reserved.
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Harry Collias is a tax specialist at H&R
Block. His five-year second career at Block followed
a 25-year stint in management at Digital Equipment Corporation.
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