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After you file
No, this is how the 2% rule works.
If you had $20,000 of tuition expenses, you claim $10,000 for the lifetime learning and $10,000 as a work expense.
Then you look at your gross income, which must be less than $65,000 or you wouldn't qualify for lifetime learning, so let's say $50.000. 2% of $50,000 is $1,000, so your work related expense deduction is reduced by $1000, leaving a $9,000 deduction.
Then you need to look to see if your itemized deductions were more than your standard deduction or not. Let's say you had $3,000 of itemized deductions so the program used the $6200 standard deduction instead. If you claim $9,000 of work related expense, now your itemized deductions are $12,000, which is $5800 more than the standard deduction. Claiming an extra $5800 of deductions would reduce your taxable income by that amount, which would reduce your tax owed by 25% of that amount (if you are single and your income was $50,000, you are in the 25% bracket.) So it could save you $1350 in tax.
If you really paid $20,000 in tuition on an income of $50,000, then deleting the lifetime learning credit and claiming the entire amount as a work related expense might actually give you a larger benefit, if you are in the 25% tax bracket. (The credit is 20%, the tax brackets are 15% and 25%, so it depends on exactly where you fall in the brackets, and what other itemized deductions you have.)
The only way to be sure would be to test multiple scenarios.
If you had $20,000 of tuition expenses, you claim $10,000 for the lifetime learning and $10,000 as a work expense.
Then you look at your gross income, which must be less than $65,000 or you wouldn't qualify for lifetime learning, so let's say $50.000. 2% of $50,000 is $1,000, so your work related expense deduction is reduced by $1000, leaving a $9,000 deduction.
Then you need to look to see if your itemized deductions were more than your standard deduction or not. Let's say you had $3,000 of itemized deductions so the program used the $6200 standard deduction instead. If you claim $9,000 of work related expense, now your itemized deductions are $12,000, which is $5800 more than the standard deduction. Claiming an extra $5800 of deductions would reduce your taxable income by that amount, which would reduce your tax owed by 25% of that amount (if you are single and your income was $50,000, you are in the 25% bracket.) So it could save you $1350 in tax.
If you really paid $20,000 in tuition on an income of $50,000, then deleting the lifetime learning credit and claiming the entire amount as a work related expense might actually give you a larger benefit, if you are in the 25% tax bracket. (The credit is 20%, the tax brackets are 15% and 25%, so it depends on exactly where you fall in the brackets, and what other itemized deductions you have.)
The only way to be sure would be to test multiple scenarios.
‎June 6, 2019
6:58 AM