While the ideal higher education experience is to attend college on a full-time basis, live on the campus and remain unencumbered by financial demands, that utopia is nevertheless unreachable for many students. Some intrepid collegians must work 40-plus hours each week and fit in two or three classes per semester when they are able.
For the part-time and evening scholars, it can take nearly a decade to earn a bachelor's degree much less a higher credential. Although the burdens are many, there are some tax breaks for those who take this harder path. Yet certain contingencies are required.
Laboring While Learning
Recent research indicates that many college and university students simultaneously work jobs and take classes every semester. The latest figures show 81 percent of part-time and, interestingly, 43 percent of full-time students are employed to work in some capacity.
Indeed, some tuition payments are covered as employee benefits by numerous companies. For other pupils, the cost of higher education is so great that it must be accomplished in bite-size pieces, semester by semester. Full-timers who also work, especially full-time jobs, face very long days of toil and study before they can rest.
Tax Relief for the Working Student
University students, working or not, can claim eligibility for an education tax credit, either the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit (LLC). The AOTC is available to undergraduates (or their parents, if they are footing the bills) and can run up to $2,500 per calendar year. Meanwhile, the LLC applies to all levels of higher education and affords taxpayers a $2,000 annual credit if they meet the qualifications.
Moreover, tuition and fees are tax-deductible in some other instances. Interest on student loans is also deductible.
Tax Relief for Commuting from Work to School
The tax benefits noted above help take the financial sting out of being an employee-collegian. Yet a significant source of financial stress is the travel from home to work to school and back home again. As a rule, the Internal Revenue Service (IRS) does not allow deductions for college commutes. However, the best rules come with exceptions, and this one is no different.
A gainfully employed, full-time individual who is in school to pursue a degree or certificate program directly related to the job or department occupied by the employee may be allowed to make such a deduction. It should be noted that this can only be used by Armed Forces reservists, fee-basis state or local government officials, qualified performing artists and employees who have impairment-related work expenses. Under certain conditions, the IRS will view the college campus as a secondary work site, thereby making mileage deduction allowable.
Taxpaying student-workers must keep a log of all mileage that qualifies under IRS rules. In fact, the log should include all miles driven, reflecting odometer readings at each point of departure and destination. Plus, they must record the odometer readings at the start of the year and at the end. The total number of miles driven is also necessary for the deduction to be granted. This figure is entered on IRS Form 2106.
Students who are self-employed or working as contractors can claim certain miles they drive for their business on IRS Schedule C and should also keep records.
A Word of Caution
Can you deduct mileage on taxes? Under the strictest of circumstances, as previously noted. However, the employee must assiduously examine every pay statement/stub, looking at every figure.
There are companies that will provide a mileage allowance for their staff people who are studying for work-related degrees. If they provide such subsidies, then the driver is no longer entitled to any mileage-based deductions because compensation is already in hand. Attempting to claim a deduction under these circumstances may raise red flags at the IRS, and attract the agency's unwelcome attention.