If you follow the news, you may hear a lot about tax breaks and credits that can only be used by the very wealthy.

Wouldn’t it be great if there were tax breaks for ordinary people for regular things like buying school supplies or paying for band instruments? There are, and there have been for years.

Minnesota has the K-12 Education Credit for qualifying educational expenses, which is a credit that can reduce your tax to zero and can also increase your refund.

For this credit, qualifying education expenses has a fairly broad definition. It can be the most basic things, like paper, pencils, and textbooks, or it can be used for unexpected things such as tutoring or even musical instruments.

It’s important to note that this is a credit for which the tax authorities require you to keep your receipts. Receipts don’t need to be sent in with your tax return, but the Minnesota Department of Revenue may send you a letter asking for receipts, and if you can’t produce them, they’ll charge you for the credit, plus penalties, plus interest.

What Qualifies?

Many educational expenses qualify for this credit:

• Fees for classes outside the regular school day
• Fees for tutoring or music lessons
• Cost of school materials (school supplies)
• Cost of purchase or rental of musical instruments (if used during the school day)
• Cost of transportation to school
• Cost of a computer and educational software (up to $200)

Limits

The credit is for 75% of the qualified expenses, so if you spend $1,000 on a new saxophone, only $750 will be a credit.

The credit is limited to $1,000 per child.

Once taxpayers have income greater than $33,500 (for only 1 or 2 children, and $2,000 more for each additional child), the credit is reduced by 25¢ for each dollar of income greater than $33,500. For instance, if a family with 1 child makes $35,500, it will be limited to $500 of credit ( $1,000 – ($35,500 – $33,500) X 0.25 ).

For individuals or families that have income over the threshold, tracking all this information is still useful, as expenses that are not used for the credit work for the Minnesota deduction for educational expenses.

This is a great tax opportunity for taxpayers with school-age children. Please keep good records when doing back to school shopping this fall. It’s like a 75% off  school supplies sale if you do. If you want to learn more, please contact us at info@sundbergtc.com.