1. Exploring Education Benefits
Example Immersion Lesson Filing Status and More
9/12/2018
Exploring Education Benefits
“Where is the
most bang
for the buck?”
Instructor Notes
The purpose of this presentation is to review the various options for reporting education expenses in the return. Volunteers will be able to practice entering information in TaxSlayer. Discussion questions are included to help reinforce the tax law associated with education benefits and the volunteers will be directed to review key pages in publication 4012.
The last part of the exercise discusses reporting unrestricted grants as taxable income in order to maximize benefits on a return and may not be suitable for discussion with new volunteers.
October 28, 2016 LC & Instructor Training

2. Immersion Exercise Log onto your TaxSlayer Account
Begin a new return Jack Jackson

3. Single
Self-employed Basketball Coach YMCA
Half-time student, College Freshman
Pursuing a degree in sports management

4. Example Immersion Lesson Filing Status and More
9/12/2018
Make a Table
On a sheet of paper create the following table:
Benefit
AGI
Refund
No Education Benefits
American Opportunity
Lifetime Learning
Business Expense
Tuition and Fees
October 28, 2016 LC & Instructor Training

5. Example Immersion Lesson Filing Status and More
9/12/2018
Enter Jack’s self-employment income
Jack has no expenses
October 28, 2016 LC & Instructor Training

6. Example Immersion Lesson Filing Status and More
9/12/2018
No Education Benefits
What is Jack’s AGI? Refund?
Benefit
AGI
Refund/Amt Due
No Education Benefits
$25,092
($2,060)
American Opportunity
Lifetime Learning
Business Expense
Tuition and Fees
October 28, 2016 LC & Instructor Training

7. Education Expenses
Jack is pursuing a degree in sports management so that he can improve his skills and value as a coach
Jack has a 1098-T showing his tuition expense (Scholarship is for tuition only)
He also has a the following receipts:
$125 for a campus parking pass
$350 for course books he bought through an on- line bookstore
Jot these down

8. Options
Jack was told that there are several options for claiming education expenses on his return and that he should go see the experts at AARP Tax-Aide who would determine which option was best for him.

9. Example Immersion Lesson Filing Status and More
9/12/2018
First Let’s Review
Open Pub 4012 to Tab J-2&3
Review the various benefits and note differences
Instructor Notes
Instructors can use this opportunity to quiz volunteers and have them find the answers on these two tabs.
Examples:
When can text books be used as a qualified education expense? and Where must they be purchased?
When can a computer be claimed as an expense?
When can room and board be include on a return to help reduce a taxpayer’s tax liability?
How much employer assistance can be received tax free?
October 28, 2016 LC & Instructor Training

10. American Opportunity Credit
Example Immersion Lesson Filing Status and More
9/12/2018
American Opportunity Credit
What probing questions must you ask to see if Jack qualifies?
Open Pub 4012 to Tab J-5 & J-6
Instructor Notes
Give volunteers a chance to answer and then direct them to pub 4012 to review
October 28, 2016 LC & Instructor Training

11. American Opportunity Credit
Enter the 1098-T for the
American Opportunity Credit

12. Example Immersion Lesson Filing Status and More
9/12/2018
Comparing Benefits
What is Jack’s AGI? Refund?
Benefit
AGI
Refund/Amt Due
No Education Benefits
$25,092
($2,060)
American Opportunity
$24,930
$487
Lifetime Learning
Business Expense
Tuition and Fees
Instructor Notes
Volunteers may have different answers for AGI. What business expenses did they deduct? The $125 parking pass at the university can be deducted, plus the AOC limits expenses to $ In this case Jack would use $3,700 in tuition and can add $300 for textbooks. The remaining $50 of textbooks could be deducted as a business expense.
Why did AGI change? Examine the 1040 and note the changes
October 28, 2016 LC & Instructor Training

13. Lifetime Learning Credit
Example Immersion Lesson Filing Status and More
9/12/2018
Lifetime Learning Credit
What requirements are different for this benefit than for the AOC?
Instructor Notes
Volunteers should be directed to find the answers in Pub 4012
October 28, 2016 LC & Instructor Training

14. Change the 1098-T information for the Lifetime Learning Credit

15. Example Immersion Lesson Filing Status and More
9/12/2018
Comparing Benefits
What is Jack’s AGI? Refund?
Benefit
AGI
Refund/Amt Due
No Education Benefits
$25,092
($2,060)
American Opportunity
$24,930
$487
Lifetime Learning
$24,651
($1193)
Business Expense
Tuition and Fees
Instructor Notes
Volunteers may have different answers for AGI. What business expenses did they deduct? The $125 parking pass at the university can be deducted, plus for LLC textbooks must be purchased through the university so because Jack bought them on line he can’t include them for LLC, but he can put the full $350 as a business expense.
Examine the 1040 and note the changes
October 28, 2016 LC & Instructor Training

16. Example Immersion Lesson Filing Status and More
9/12/2018
Business Expense
Can Jack deduct his education expenses as a business expense?
Jack attends classes during in the morning then drives to the YMCA to coach in the afternoon. Can he deduct that mileage?
Instructor Notes
This is an opportunity to discuss the rules on deducting mileage. In this case, is the college treated as a business location?
October 28, 2016 LC & Instructor Training

17. Delete the 1098-T information and enter appropriate business expenses

18. Example Immersion Lesson Filing Status and More
9/12/2018
Comparing Benefits
What is Jack’s AGI? Refund?
Benefit
AGI
Refund/Amt Due
No Education Benefits
$25,092
($2,060)
American Opportunity
$24,930
$487
Lifetime Learning
$24,651
($1193)
Business Expense
$21,212
($893)
Tuition and Fees
Examine the 1040 and note the changes
October 28, 2016 LC & Instructor Training

19. Tuition and Fees Adjustment
Example Immersion Lesson Filing Status and More
9/12/2018
Tuition and Fees Adjustment
This is rarely the best option.
When might it be worth evaluating?
Instructor Notes
Tuition and Fees adjustment was to expire at the end of If it is not extended by congress then you should delete this discussion.
October 28, 2016 LC & Instructor Training

20. Example Immersion Lesson Filing Status and More
9/12/2018
Remove the tuition from business expenses and enter as a Tuition and Fees Adjustment
Instructor Notes
This is entered from the 1098-T form in TaxSlayer. If using the 1040 View, the link from line 34 will take you back to the Education Credits page.
October 28, 2016 LC & Instructor Training

21. Example Immersion Lesson Filing Status and More
9/12/2018
Comparing Benefits
What is Jack’s AGI? Refund?
Benefit
AGI
Refund/Amt Due
No Education Benefits
$25,092
($2,060)
American Opportunity
$24,930
$487
Lifetime Learning
$24,651
($1193)
Business Expense
$21,212
($893)
Tuition and Fees
$20,951
($1378)
Examine the 1040 and note the changes
October 28, 2016 LC & Instructor Training

22. Example Immersion Lesson Filing Status and More
9/12/2018
Extended Discussion
Jack is interested in taking a class at a fitness center that teaches coaches how to train their athletes on strength and fitness. Cost is $300. He asks if he could use this as an education benefit?
Instructor Notes
This can be an optional discussion question to have the volunteers use the tabs in Pub Is this class eligible for either the AOC or LLC? Could it be a business expense?
October 28, 2016 LC & Instructor Training

23. Unrestricted Scholarship
Example Immersion Lesson Filing Status and More
9/12/2018
Unrestricted Scholarship
Assume that Jack’s scholarship is unrestricted
How would you use the scholarship to optimize the return?
One option
Report the scholarship as taxable income on 1040 Line 7
Use only $2,000 for AOC (100%) as second $2,000 is only worth 25%
Use the rest ($4,700 + $350 + $125) as business expense to reduce overall tax (15% % SE Tax)
Instructor Notes
This part of the exercise and discussion should probably be used with experienced (Master) Counselors only.
Instructors should pose the question and have the Counselors discuss options before presenting the option.
Instructors may want to have experienced Counselors use the Bogart Education Calculator
October 28, 2016 LC & Instructor Training

24. Example Immersion Lesson Filing Status and More
9/12/2018
Comparing Benefits
What is Jack’s AGI? Refund?
Benefit
AGI
Refund/Amt Due
No Education Benefits
$25,092
($2,060)
American Opportunity
$24,930
$487
Lifetime Learning
$24,651
($1193)
Business Expense
$21,212
($893)
Tuition and Fees
$20,951
($1378)
Unrestricted Scholarship
$23,283
$942
Examine the 1040 and note the changes
October 28, 2016 LC & Instructor Training

25. Example Immersion Lesson Filing Status and More
9/12/2018
Questions
October 28, 2016 LC & Instructor Training