While many professions require continuing professional education, this blog mainly focuses on K-12 educators. I’ve written previously about the importance of advancing horizontally on the salary schedule as quickly as possible. Sometimes when we discuss this in my financial literacy class for Colorado educators participants will acknowledge this, but also bemoan the cost of taking those classes. Those costs are real, of course, but the payoff from the (eventual) salary advancement will more than make up for it (especially if you do it earlier in your career). What many educators don’t realize, however, is that there are some tax breaks that can help pay for those courses.
529 Plans
- Some people have leftover money in a 529 plan where they are the designated recipient. This may be an account your parents or grandparents funded, or even an account you funded for yourself.
- Some people have an account they funded for their own children (or other family members) and have “extra” in it because they’ve completed their education and didn’t spend it all (or you don’t anticipate them spending it all). You can simply transfer the amount you need to an account with yourself as the designated recipient and reimburse yourself from there.
- You can create and fund a 529 account for yourself now. While this won’t necessarily leverage the tax-free growth of the money over time (although it could if you put in enough to fund your anticipated continuing education over the next 5-10 years or so), you will still get the state tax deduction if your state offers it (for Colorado, that’s a quick 4.4% savings).
Lifetime Learning Credit
- The Federal Lifetime Learning Tax Credit is a credit worth 20% of your qualified expenses up to the first $10,000 you spend in a year (so up to a $2,000 credit each tax year).
- There is an income phase out for a Modified Adjusted Gross Income of between $80,000 and $90,000 for single filers and $160,000 to $180,000 for married filing jointly. Many educators in the first half of their careers will qualify for this (unless they have a high-earning spouse).
- Note that you do have to be taking the course from an eligible financial institution.
Deducting Student Loan Interest
- You can deduct up to $2,500 of student loan interest. This is an above-the-line deduction, so does not require you to itemize deductions.
- There is an income phase out for a Modified Adjusted Gross Income of between $85,000 and $100,000 for single filers, and between $170,000 and $200,000 for married filing jointly. Many educators in the first half of their careers will qualify for this (unless they have a high-earning spouse).
Fisch Financial 