Tax Deductions for Tools Purchased for School
Federal tax law includes a few options for writing off college tuition. It's trickier taking off for related expenses, such as books, school fees and equipment. Depending on which tax break you're using for school costs--and remember, you can only choose one--it may be possible to deduct tools for your courses. These credits and deductions apply at any college, university or vocational school that qualifies to receive student aid.
The American Opportunity Tax Credit lets you take up to a $2,500 credit for school expenses, including books and equipment, for each qualifying student in your family. Qualifying students are undergraduates enrolled at least half-time for one semester or quarter. The Lifetime Learning Credit covers undergraduate or graduate study and allows you to take a total $2,000 off your taxes for all family education expenses. You can only use the Lifetime Learning Credit for tools if you buy them from the school. That's not a restriction with the American Opportunity credit.
Tuition Tax Deduction
You can take up to $4,000 in school expenses as a tax deduction, rather than a credit. Expenses for you, your spouse or your dependent all count toward the total. Unfortunately, you can only claim a write-off for tools or equipment if you buy them from the school and if it's required that you do so. You claim the tuition deduction on your Form 1040 so you can write off these costs off even if you don't itemize deductions.
Going to school to train for a new career is not a deductible business expense. If you're already self-employed and buy the equipment as part of learning or improving your job skills, you can deduct it from your business income. If you're an employee, you can take it as a 2 percent itemized deduction. Add all the deductions in this category together, subtract 2 percent of your adjusted gross income and claim whatever remains as your write-off.
You can take more than one type of deduction in a year, but not for the same expense. For example, if you deduct $300 worth of tools as a business expense, you can't claim the tuition deduction for them too. You also can't take a tax credit and the tuition deduction for the same student in the same year. If you have to choose, a tax credit usually gives you a better deal than a deduction.
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.