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Navigating Back-to-School: Student Loans & Educators’ Expenses

With the back-to-school season upon is, students and educators alike are preparing for another academic year. One other thing to prepare for are the financial considerations that come into play. Here are two key aspects to consider: the dynamic nature of student loans and the potential for tax savings for educators.

Evolution of Student Loans: From Pandemic Relief to Repayment
The landscape of student loans has experienced significant shifts since President Biden’s initial declaration of student loan forgiveness during the pandemic. In June, the wide-sweeping student loan forgiveness concept was struck down in the U.S. Supreme Court causing most borrowers to face re-payments beginning Sept. 1, 2023.


However in August, some borrowers received emails suggesting possible exemptions from
repayments through Income-Driven Repayment (IDR) plans. The other crazy piece to the puzzle is that if the loan is forgiven, some states consider the forgiveness amount as taxable income. If a borrower has debt forgiven, it is treated as if the borrower earned additional income in the previous tax year equal to the amount of forgiven debt. For example, if a borrower with an annual taxable income of $35,000 owes $20,000 in debt that is subsequently forgiven or canceled, the $20,000 in debt is added to their taxable
income for a total of $55,000. Generally, a borrower is provided a 1099-C tax form when debt is canceled or forgiven, which reports the forgiven amount as taxable income to the IRS and the taxpayer. Since each state is addressing whether cancelled student loan debt is to be taxed at the state level, you will need to consider this when filing your tax return as well.


The silver lining remains: the deductibility of student loan interest.
For those repaying student loans, the ability to deduct student loan interest as an above-the- line deduction is a bit of relief. This deduction decreases your taxable income, thereby decreasing tax owed. The cap on this deduction is set at $2,500 for the year 2023. It’s important to note that eligibility for this deduction.

 Unmarried individuals who qualify as heads of households or widows/widowers begin experiencing a phase-out of the deduction at a modified Adjusted Gross Income (AGI) of $75,000, with the phase-out completing at $90,000.
 If you’re married, the phase-out starts at $150,000 and concludes at $180,000.

Educators’ Expenses: From Classroom Investment to Tax Deduction
Educators often invest their own resources to provide the best learning environment for their students. To alleviate some of these financial burdens, eligible educators can take advantage of a deduction of up to $300 for qualifying, unreimbursed expenses incurred during the year. For those who are married and file jointly with another eligible educator, the limit increases to $600—though each spouse is capped at $300.

This deduction covers a range of expenses directly related to enhancing the classroom
experience such as:

  1. Books, Supplies, and Materials
  2. Equipment such as computer equipment to software and services
  3. COVID-19 Protective Items like face masks, disinfectants, hand sanitizers, and physical barriers
  4. Professional Development Courses directly connected to their curriculum or student needs. However, depending on circumstances, it might be more beneficial to claim the lifetime learning credit.

With the start of a new school, both students and educators are reminded of the financial
considerations that come hand in hand with education. Understanding the nuances can provide
an element of tax relief. As with all deductions and credits, you are encouraged to keep good
records, including receipts, cancelled checks and other documentation.

For more insightful tax tips, read the Franklin County Free Press for our weekly article. You can
also find other tax tidbits by following Saunders Tax on Facebook and Twitter and by following
me, Bev Stitely, on Linked In.
Saunders Tax & Accounting is open Monday through Thursday from 9 am to 5 pm and is
available online at www.SaundersTax.com. Awarded the Hagerstown Chamber of Commerce
“2023 Small Business of the Year”, we have been providing a Less Taxing Life and More
Prosperous Solutions since 1984!

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Kitty D Hann 1938-2024

At 18 years of age, Kitty was recruited to work for the Dept. of the Navy in Washington, D.C., where she resided in an all-girl’s boarding house. She created lifelong friendships there.

John Eugene Walck 1933-2024

Mr. Walck worked proudly for Hagerstown Canteen Vending Service for 50 years, retiring in 2003. He enjoyed the outdoors, trap shooting, and collecting trains.

Justin L. Nichols 1981-2024

Justin enjoyed hunting, fishing, spending time around a camp fire, time spent with family and friends and living life to the fullest.

Robert “Bob” Rhoten 1933-2024

After he left the military, Bob worked several data entry jobs. After 10 years of service to the Federal Government, he retired in his early 70’s.

Nina Fegan 1947-2024

Nina graduated from St. Joseph’s Nursing School in Lancaster, PA as a Registered Nurse. She enjoyed puzzles, reading and vacationing in Cape May, NJ.

Duane Lee Bidlack 1938-2024

Duane earned a Bachelor’s degree from Tri-State College and later a PhD in Chemical Engineering from Michigan State University.

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