Tolls and subway and bus fares – not to mention the cost of fossil fuels – have risen significantly in the last year or so. Some who commute to school may pay hundreds, even thousands, of dollars a year in school-related travel. It's one thing to incur these school-related travel costs without an increase in salary or a decrease in other costs to offset it. It can be even more frustrating to learn that student commuters are victims of circumstance with no means to recover even a portion those costs via their tax returns.
Are School Commuting Costs a Deductible College Expense?
When it comes to taxable income and traveling to and from school, there is no method by which a student or parent can deduct student commuting expenses from taxable income. Commuting expenses, whether to school or to work, are never deductible.
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In terms of the U.S. Tax Code, the cost of commuting to work or to school is simply a cost of doing business or acquiring an education. Relief in the form of tax credits, however, is available to ease the financial strain of earning a degree or acquiring a new skill.
Consider also: Tax Credit vs Tax Deduction: What's the Difference?
Tax Credits for Students
When the American Recovery and Reinvestment Act was signed into law in February 2009 and the Lifetime Learning Credit in 1997, Congress changed the rules on tax breaks for educational expenses. These updates can have a positive effect on the tax liability of a student, or a student's parent, depending of the taxpayer's modified adjusted gross income.
Both the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC) are federal tax credits by which a student, or a parent, can reduce an annual tax bill by the costs incurred for the education or training of an undergraduate, graduate, non-degree or vocational student. The amount of the credit a taxpayer receives depends multiple factors, including the student's school expenses, the taxpayer's modified adjusted gross income and the related tax liability.
Consider also: How to Calculate Education Credits
American Opportunity Tax Credit
The American Opportunity Credit (AOTC) reduces the taxpayer's liability by as much as $2,500 assuming that the student accumulates $2,500 or more in qualified expenses as she pursues an undergraduate degree. In this case, the taxpayer claims the first $2,000 of the student's college expenses, including school fees, books, supplies and tuition, but not commuting expenses. Then, the taxpayer can claim an additional 25 percent of other education-related costs up to $2,000, or $500.
By claiming the AOTC, the student, or the parent who financed the student's efforts to attain a degree, decreases a tax burden for as many as four years – the average time required to earn an undergraduate degree. That tax payer, whether a student or the parent, can claim the maximum tax credit of $2,500 for each school year. To claim the tax credit on a parent's tax return, that parent must list the student as a dependent on the return.
Consider also: What Educational Expenses Are Deductible?
Lifetime Learning Credit
The Lifetime Learning Credit (LLC) reduces the tax burden for an eligible student or parent who pays the tuition and related expenses incurred as an undergraduate, graduate or non-degree or vocational student receives advanced training at an eligible education institution. The taxpayer can claim a tax credit of as much as $2,000 – 25 percent of the first $10,000 – per tax return each year that the student enrolls in a course to acquire or enhance a job skill.
To receive the tax credit, the parent must claim the student as a dependent on a federal tax return. In addition, the cash must be spent on school tuition, fees and books or supplies the student is required to purchase from the school, assuming that's a condition of enrollment. Living and transportation expenses are are not included.
What's more, each taxpayer can claim the American Opportunity Tax Credit and the Lifetime Learning Credit for a dependent student's education assuming the taxpayer doesn't claim the two credits for the same student in one year.