Online Degree + Tax Credit = Free Laptop

In January 2013, at the age of 31, I was able to finally finish my Bachelors Degree.  It wasn't really a 13 year journey but 11 years of nothing and then 2 years of hard work.  I actually started going to college at 18 but I spent more time sleeping than actually going to class.  I decided that school was not for me so when an email came out that stated I could quit school today and I would only owe the school half of my tuition or I could quit tomorrow and owe the entire semesters tuition I decided to quit school and try something new.

11 years later I decided it was time to go back to school.  For those 11 years I actually had access to tuition assistance, from my employer, but I was too busy being lazy to take advantage of it.  I finally decided to start taking classes at one of the for-profit online universities.  I don’t want to get in to the pros/cons of online education right now.  My job required travel, which meant that a traditional school was not an option, and at the time I was looking to check a box so I was more concerned with cost and the type of degree I was interested in. My focus was to make sure I found a regionally accredited school and as I started to take classes I realized how beneficial they were so I focused on getting as much as I could out of each class.

During my last year of school I maxed out my tuition assistance fairly quickly so I had to spend my own money to pay for a few of my classes.  I decided that my education and the increase in future earning potential was worth spending some of my own money.  Little did I know that I could actually claim those expenses on my tax return.  

The American Opportunity Tax Credit has the following benefits:

-       $2,500 credit

     - 100% of the first $2,000
     - 25% of the next $2,000

-       Used for course related books, supplies, and equipment

-       Used for first 4 years of post secondary education

-       Filing single with less than $80k in adjusted gross income

-       Filing join with less than $160k in adjusted gross income

-       Cannot claim this and claim the “tuition and fees” tax deduction

The key difference between the American Opportunity Tax Credit and the other educational credits is that “the term "course materials" means books, supplies and equipment needed for a course of study whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance” (irs.gov).  In order to get online and take classes a computer becomes “a condition of enrollment or attendance”.   This means that if I only have to spend $1,000 out of pocket this year then I can buy a computer for up to $1,000 and claim it on my 2014 tax return. 

Hopefully you will use the entire credit to to complete more classes and graduate early instead of buying a computer but if you are like me, and cant take any more classes this year, go ahead and use the entire credit.