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Author: japper Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121261  
Subject: re-posted: Tax benefits Date: 1/1/2002 11:55 AM
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Since I didn't get any replies, I am re-posting as follows:

I am trying to figure out what, if any, may be the better way to play the new tax laws on education expenses.

Here is the scenario:
1. FT employee, FT student
2. Education is non-temporary (greater than one year in length)
3. Enhances job (maintains/improves skills), does not lead to qualifying for a new career
4. Spent approx $15k in 2001 for tuition, books, travel for conference
5. Education expenses are not reimbursed by employer

From the reading in Pub 17 and Pub 508, I qualify for Lifetime Learning Credit as well as work-related expenses deductions. I will fall into the phase-out segment on the credit, have not calculated the exact reduction in the credit but it will not be the maximum allowed.

As I understand the rules, I can claim $5k in education expenses for the Lifetime Learning credit at whatever that phase-out works out to be. Now, can I also claim the work-related education expenses for the remaining $10k? I cannot find anything that states I cannot claim both the credit and the deduction. I did find a blurb that said I cannot claim the "same" expenses in mulitple places such as for the credit and the deduction.

Am I reading the rules correctly? Alternatively, it may be better to forego the Lifetime Learning credit and use the entire $15k as work-related but I don't want to raise red flags with our friends at the IRS either. I try to be a conservative taxpayer and not go into gray areas most of the time.

thanks for your opinions,
Jenn
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Author: acm4tax Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56944 of 121261
Subject: Re: re-posted: Tax benefits Date: 1/8/2002 11:24 PM
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I sent your question to IRS for their interpretation of your tax situation. Print this out and keep with your tax papers for future reference. I just received the response today.

acm4tax

IRS responded as follows:
"NOTE: Our response to your tax law question appears below. If you have a follow-up question or another general tax law question, please return to our web site at: (http://www.irs.gov/taxlaw) to submit it. Please do not use your "reply" button to respond to this message. More helpful information is provided at the end of this message.


Your Question Was:
I spent approx $15k in 2001 for tuition, books, travel for a conference. None of these education expenses were not reimbursed by my employer. From the reading in Pub 17 and Pub 508, I qualify for Lifetime Learning Credit as well as work-related expenses deductions. I will fall into the phase-out segment on the credit, have not calculated the exact reduction in the credit but it will not be the maximum allowed. As I understand the rules, I can claim $5k in education
expenses for the Lifetime Learning credit at whatever that phase-out works out to be. Now, can I also claim the work-related education expenses for the remaining $10k? I cannot find anything that states I cannot claim both the credit and the deduction. I did find a blurb that said I cannot claim the same expenses in mulitple places such as for the credit and the deduction. Am I reading the rules correctly? Would it be better to forego the Lifetime Learning credit and use the entire $15k as work related educational expenses?


The Answer To Your Question Is:
Based on your statement None of these education expenses were not reimbursed by my employer, it appears the employer paid all the expenses and you would not be entitled to any credit or expense deduction unless the reimbursement is included in your Form W-2.

If this is incorrect and your employer did NOT reimburse you for the expenses then you would be entitled to claim the Lifetime Learning Credit for the first $5000 and the remaining $10,000 as work-related education expenses (assuming they are qualifying expenses).

In order to determine if it would be better to forego the Lifetime Learning Credit and use the entire $15,000 as a work-related educational expense we suggest you compute your taxes both ways and see which is most advantageous.

We apologize for the delay in responding to your question.

IRS forms and publications may be accessed on our web site at the following address: http://www.irs.gov/forms_pubs/index.html or ordered through our toll-free forms line at 1(800) 829-3676 which is available 24 hours a day, 7 days a week, with 7-10 days delivery time.

We are interested in your opinion and providing the best possible service to you. Please take a moment to answer our survey at:
http://www.irs.gov/help/newmail/email-survey.html
This answer is based on our understanding of the facts you presented in your question. Omission of facts may affect the answer given.

Here's a tip for navigating the IRS web site. Use the "search" button at the bottom of the home page. Enter key words or phrases for your topic in the entry box. It could help you find your answer immediately.

EMPLOYEE ID: 87-30848 Ms. Dockstader Tel.:(800)829-1040 msg#: 1066208"



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Author: japper Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56996 of 121261
Subject: Re: re-posted: Tax benefits Date: 1/9/2002 10:46 PM
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acm4tax,
Thank you. I noticed that when I just re-read what I posted, I put in an additional NOT but the IRS clarified the issue perfectly. I will be able to make both claims as I thought was possible.

Jenn

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