Mighty Moms Blog

The ABCs of Education-Related Tax Breaks

The ABCs of Education-Related Tax Breaks

Educating your family can be costly. However, if your children are in elementary or high school, you could save with tax breaks offered by the Louisiana Department of Revenue.As you begin to shop for supplies and other necessities, keep in mind the important information below.

Louisiana Department of Revenue allows for a school expense deduction from your Louisiana taxable income. To qualify, you must be a Louisiana resident and the student must be claimed as a dependent on your return. The deduction is allowed for up to $5,000 per dependent in grades Kindergarten through 12thgrade in either public, private, or home-schools. If you meet the requirements, it is recommended that you keep all of your receipts for the expenses that qualify to show proof of payment.

To qualify, these expenses must be required by the school:

  1. Uniforms – The cost of uniforms for day-to-day use
  2. Textbooks, curricula, fees and other instructional materials
  3. School supplies – notebooks, pencils, paper, calculators, rulers, etc.
  4. School Tuition

The new Tax Cut and Jobs Act (TCJA) allows parents to use funds from Louisiana’s Student Tuition And Revenue Trust (START) 529 plans to pay school tuition in connection with enrollment or attendance at an elementary or secondary public, private or religious school beginning January 1, 2018. Louisiana’s 529 plan was created as a tax-advantaged savings account designed to encourage saving for future higher education costs. In response to the changes from TCJA, the Louisiana legislature created a new program called STARTK12.  This program is for contributions to be used for K through 12 expenses.  In 2018 only, up to $10,000 may be withdrawn from an existing START account (originally only for college expenses) for Kindergarten through 12thgrade expenses. After 2018, funds for K through 12 must be withdrawn from STARTK12 plans.  Regular START plans will be restricted to college.  While the contributions to the plan are not exempt from federal tax, the earnings on the contributions build up tax-free. Louisiana Department of Revenue allows the contributions to a traditional START plan to be deducted from Louisiana taxable income up to $2,400 per beneficiary ($4,800 if married filing jointly). No deduction is allowed for contributions to STARTK12 plans; however, the account is still very beneficial as the earnings  on the contributions build up tax free.

In case you have any questions, your local tax professional can not only help you understand the latest rules, but also advise you on how to get the most tax-savings from your child’s school expenses. An education opens the door to a brighter future for your children and other family members. By planning ahead, you will help minimize your family’s financial stress and maximize your tax savings.

 

-Amanda Moss

 

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