You may be able to use an educational tax credit for a computer purchase through the American Opportunity Tax Credit or the Lifetime Learning Credit program. Alternatively, you may be able to deduct the cost of a laptop through education expenses tax deductions.
Depending upon your status as a student or educator, you may be able to take advantage of numerous tax deductions and credits to help offset the cost of your laptop.
The American Opportunity Tax Credit
The American Opportunity Tax Credit and the Lifetime Learning Credit allow you to claim a tax credit for qualified educational expenses at eligible educational institutions. Qualified expenses are tuition, fees and course-related costs such as books, supplies and equipment that are required for the courses your taking. This can include a tax credit for a computer purchase if the computer is required.
Because it’s limited to four years, the American Opportunity Tax Credit is most often used by parents putting their children through a four-year degree program. The Lifetime Learning Credit is most often used by graduate students because there is no time limit to how long you can claim it.
If you don’t qualify for American Opportunity Tax Credit or Lifetime Learning Credit tax credits, you may be able to deduct the cost of a laptop through an education expenses tax deduction called the tuition and fees deduction. To take this deduction for both 2017 and 2018 tax years, your adjusted gross income has to be $80,000 or less if you’re single and $160,000 or less if you’re married and filing jointly. You cannot deduct tuition and fees if you’re married and filing separately. This deduction can be taken whether the student is yourself, your spouse or a dependent.
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Educator Deduction Opportunities
If you’re a teacher you may be able to deduct a laptop for school use. The IRS allows educators to deduct up to $250 in unreimbursed educational expenses. These expenses may include the cost of a computer and software as long as you use the laptop in the classroom. This applies to tax years 2018 and 2017.
If higher education is not part of your plans, you may be able to deduct the cost of a laptop as an “ordinary and necessary job expense,” but only for tax years 2017 and earlier. The IRS defines an ordinary expense as one that is “common and accepted in your field of trade, business or profession.” A necessary expense is one spent on something that is helpful and appropriate for your work. An expense doesn't have to be required to be considered necessary.
Credits and Deductions Exceptions
Both educational tax credit programs and the tuition and fees deduction have caps, income limits, eligibility requirements and differences. For example, under the American Opportunity Tax Credit program, the laptop does not have to be bought from the school, but if you’re using the Lifetime Learning Credit it does. Be sure to check the IRS’s website or talk with your professional tax preparer to see which tax break you qualify for.
Even though you may qualify for more than one educational credit or deduction, you can only use one. If you find yourself in this situation, a tax professional should be able to help you sort out which one will help you the most.
Education Expenses Tax Deductions 2018
Tax reform eliminated some popular tax breaks for 2018. Fortunately, educational benefits were not among them. However, business expenses were. The only job-related expenses that may still be deductible for the 2018 tax year and beyond are some incurred by members of the military.
Additionally, Form 1040 is being redesigned for the 2018 tax year. The IRS has so far published a draft. It’s about half the length of the old 1040. It also replaces Forms 1040-A and 1040-EZ. The idea is to get more taxpayers using the same form and supplementing it with schedules as needed. It’s not yet clear where you’ll enter education credits or deductions on the new 1040, but the form will be finalized by January 2019.
Education Expenses Tax Deductions 2017
American Opportunity Tax Credit and Lifetime Learning Credit tax credit limits are the same for both 2017 and 2018 tax years: $2,500 and $2,000, respectively. The cap on the tuition and fees deduction also remains the same for 2017 and 2018: $4,000. To claim the American Opportunity Tax Credit or Lifetime Learning Credit for 2017, complete Form 8863 and enter the information from it on Form 1040's line 50. To deduct tuition and fees on your 2017 return, complete Form 8917 and enter the information from it on Form 1040’s line 34.
- Intuit TurboTax: Can I Deduct My Computer for School on Taxes?
- Intuit TurboTax: Can I write off my laptop I bought primarily for my business?
- IRS.gov: Deducting Teachers’ Educational Expenses at a Glance
- IRS.gov: Instructions for Schedule A, 2017
- IRS.gov: Publication 970 Tax Benefits for Education 2017
- IRS.gov: Qualified Education Expenses
- IRS.gov: Tax Benefits for Education: Information Center
- The Motley Fool: Your 2018 Guide to College Tuition Tax Breaks
- IRS. "Lifetime Learning Credit." Accessed Oct. 27, 2020.
- IRS. "What Is an Eligible Educational Institution?" Accessed Oct. 27, 2020.
- IRS. "Qualified Education Expenses." Accessed Oct. 27, 2020.
- IRS. "Publication 970 Tax Benefits for Education: Adjustments to Qualified Education Expenses," Pages 25–27. Accessed Oct. 27, 2020.
- IRS. "Education Credits AOTC LLC." Accessed Oct. 27, 2020.
- IRS. "American Opportunity Tax Credit." Accessed Oct. 27, 2020.
LeDona Withaar has over 20 years’ experience as a securities industry professional and finance manager. She was an auditor for the National Association of Securities Dealers, a compliance manager for UNX, Inc. and a securities compliance specialist at Capital Group. She has an MBA from Simmons College in Boston, Massachusetts and a BA from Mills College in Oakland, California. She has done volunteer work in corporate development for nonprofit organizations such as the Boston Symphony Orchestra. She currently owns and operates her own small business in addition to writing for business and financial publications such as Budgeting the Nest, Zacks and PocketSense.