With the rising costs of education, many taxpayers, like yourself, who are taking ESL classes, may wonder if they are tax-deductible. Paying taxes in and of itself can prove to be a very confusing endeavor, but figuring out if you qualify for any tax deductibles or credits can be downright mind-boggling.
ESL classes can be tax-deductible, but your eligibility can vary. Depending on income, whether you’re taking ESL classes recommended by an employer or are seeking them out individually, you may or may not be able to claim your ESL class as a tax-deductible.
There are specific tax deductibles and credits that allow you to claim your ESL class; however, there are limitations on how much you can claim in a credit or as a deductible, regardless of income. In the remainder of this article, we’ll cover what those credits and deductibles—and their restrictions—are.
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Tuition and Fees Deductible for ESL Classes
Tax deductibles and tax credits tend to be used interchangeably, but the two have slightly different meanings. A tax deduction is a form of tax incentive that lowers the taxable income of a person or organization. To initially qualify for a tax-deductible on your education, you must first be attending an accredited institution.
According to the IRS, an eligible educational institution is any post-secondary educational institution—such as a college or vocational school—that can participate in a student aid program from the U.S. Department of Education.
If the ESL classes you are taking are from an accredited institution, you can qualify for a tax-deductible, specifically a Tuition and Fees Deduction. This allows you to deduct up to $4,000; however, there are limitations. You must have at least a half-time course load, and you must be enrolled for a recognized credential.
In general, when it comes to tax deductions and credits, the more money you make, the fewer deductions you qualify for. With the Tuition and Fees Deduction, you can only make up to $65,000 or $135,000 if filed jointly to remain eligible.
Work-Related Education Deductions
If you’re not taking ESL classes for a bachelor’s degree or another form of credential and are instead taking them to improve at your job, then you most likely qualify for a work-related education deduction. For your classes to qualify, it needs to meet one of the two following criteria:
- Your ESL class is deemed mandatory by law or your employer to keep your job status and benefits, including your current salary. The required class must have a legitimate relationship to the business.
- The ESL class must be used to either hone or maintain your job-related skills in your current employment.
Even if your ESL class meets one or both of these criteria, your qualification for the deduction can still be uncertain. You won’t qualify for a tax deduction if your ESL class or other courses are needed to meet your job’s minimum educational requirements or to pursue a new career.
Also, see: Is Being an ESL Teacher a Good Career?
Lifetime Learning Credit (LLC)
A tax credit reduces the amount of your actual tax instead of merely your taxable income. Unlike tax deductibles, the Lifetime Learning Credit (LLC) works on a dollar-to-dollar basis, thus creating more significant savings in the cost of education.
The Lifetime Learning Tax Credit exists to offset some of the costs of attending higher education or post-secondary school and applying to individual courses and ESL classes even if you aren’t working towards a degree.
In addition to attending an accredited institution, you must meet all three of the following criteria:
- You, your dependent, or a third party pay for fees such as tuition and any other related costs required to maintain eligible status and enrollment at the accredited institution. For example, student activity fees for accessing recreational centers count as a related cost.
- You, your dependent, or a third party are paying for the tuition and any required costs when enrolling in classes such as, but not limited to, textbooks, calculators, supplemental programs, and school supplies for an eligible student.
- On your tax return, the eligible student is either yourself, your spouse, or your dependent.
The maximum credit you can claim for the Lifetime Learning Credit is 20% of up to $10,000.
Keep in mind that there are income limitations on the credit that you can retrieve. If you make more than a certain amount per year, you can expect the amount of credit that benefits your taxes to be reduced.
Your credit will be gradually reduced if your modified adjusted gross income lies between $58,000 and $68,000. If you make more than $68,000 per year, you won’t qualify for the credit. However, this can vary depending on your filing status (if combined with your partner, you make less than $136,000, and you’ll still qualify for a credit).
Disqualifications for LLC
If, for whatever reason, you do not qualify for the LLC credit despite taking ESL classes at an accredited institution, there are potentially a few reasons why. You cannot claim an education credit if:
- Someone else lists you as a dependent on their tax return. Only the parent, legal guardian, or third party claiming you as a dependent can claim the education credit.
- If you choose to record your income separately and file as married filing separately, you are disqualified from claiming the LLC and many other tax benefits.
- If you’ve already claimed another educational tax credit or deductible. Double benefits are not allowed, so it’s essential to carefully look at all deductions and credits you qualify for and compare which benefits are greater for your circumstances.
- You (or your spouse) were a nonresident alien for any part of the year and did not choose to be treated as a resident alien for tax purposes.
American Opportunity Tax Credit
The American Opportunity Tax Credit (AOTC) typically rewards a more generous credit than the LLC, despite having very similar eligibility requirements.
The major difference between the two is that you must be enrolled as, at least, a part-time student for a credential or degree. You also can’t have been a state or federal crime. If you’re taking ESL classes and meet those requirements, you may qualify for the American Opportunity Tax Credit.
Like the LLC and other tax deductibles, the amount earned from the credit can phase out if your income breaks past a certain threshold.
- If you’re single, you’ll earn less on the credit if you make anywhere between $80,000 and $90,000.
- For joint filers, anything between $160,000 and $180,000 limits the amount earned.
- Anything more than the respective $90,000 and $180,000 disqualifies you from the credit.
The AOTC can give you a maximum credit of $2,500 per eligible student.
While ESL classes can be included in the tax credit, generally speaking, you’re better off trying for the LLC if you’re just taking one-off courses to improve your English speaking abilities.
However, because no double benefits are allowed, if you qualify for both the LLC and AOTC and anticipate working towards a credential, the latter has the potential to earn you even more significant savings.
ESL classes are tax-deductible, but your individual circumstances can potentially disqualify you from any tax deductibles or credits. For instance, if you make too much money, you won’t qualify for any deductibles or tax credits.
If you or your dependent are taking individual courses and aren’t classified as a full or part-time student, you can qualify for a Lifetime Learning Credit, which can allow you to claim 20% of up to $10,000—or a total of $2,000.
If you’re taking ESL classes for better performance at work, you can get a work-related deduction. For a more detailed explanation of education-related tax deductibles and credits, explore the IRS’s Tax Benefits for Education page.