Education Tax Breaks For Servicemembers

There is a great deal of support for Military Service Members who wish to return to school or to further their education. Members enrolled in skill building courses, or who are in college, university, or continuing education programs can avail themselves of several different reimbursement and tax benefit programs.  One of the better known and more popular is the Montgomery GI Bill.  This bill was enacted in August of 1985 and provides thirty-six months of financial support to selected veterans and active duty enlistees.  In addition there is a Reserve version of the bill, which does the same for Reservists of any of the five services.

Another program is REAP, or the Reserve Educational Assistance Program.  It was designed for National Guard, and Selected Reserve members who were called to active duty after the September 11,2001 Twin Towers Tragedy.  A service person is eligible only while actively serving in the National Guard or Selected Reserve

One important fact that many Military service members are not aware of is that benefits from the MGIB GI bill program and the REAP program are not counted as income for any tax purposes. Because of this educational expenses covered by these programs cannot be used for deductions or educational credits such as itemizing on Schedule A.

There are also two federal credits for taxes that are associated with educational expenses.  The Hope Credit provides up to sixteen hundred fifty dollars for each student for tuition and qualified fees.  This is for fees that qualify during the first twenty-four months of seeking higher education.  The qualifying student must be pursuing a degree and meet other various requirements.  The Lifetime Learning Credit is a credit for up to twenty percent of expenses and tuition (to a maximum amount of two thousand dollars) per student per tax return for courses taken related to job skills.  The lifetime learning credit is available every year and it is not just for students seeking a degree.

One additional method of savings is the Fees and Tuition Deduction.  It is a different way that service men and women can help offset the cost of their education. If a service member has a gross adjusted income of sixty five thousand dollars or less but no more then eighty thousand dollars income, they can deduct up to four thousand dollars of educational expenses from their taxes.  Service Members can avail themselves of any of these programs, or more than one and realize a great tax benefit while furthering their education at the same time.