LSAT Prep and Taxes

Andrew K

Hey all,

Are LSAT prep and law school applications tax deductible? IE books, 7sage course, lsat test, application fees, etc.

I got in?

Off the top of my head, I believe they are. However, if they are, they will only be tax deductible under the Lifetime learning credits on the form 8863. This is the only section that allows any graduate school education.

American Opportunity credits can never be used for any graduate school type of expenses.

The real issue you will have is justifying the expense to the IRS without a form 1098-T (tuition statement). Because of a lot of fraud related to the latter type of credit, and the lack of resources to investigate each return filed with the form 8863, the IRS has made Proposed Assessment Letters (CP2000 letters) automatic for most, if not all, returns claiming education credits, without having received a form 1098-T directly from the school. More importantly, the school must be an accredited institution with the department of education in order to distribute a 1098-T. As I mentioned before, because the lack of resources (money) the IRS will just deny any claim without the form 1098-T, regardless of any receipts showing the educational nature of the expense.

So, in order to be able to to claim a credit, you should either be attending an undergraduate school, or get into an accredited school the same year of the expense. This way ensures you have a 1098-T, and thus, avoids needing to pay the government back WITH INTEREST and possibly PENALTIES after the filing deadline.

If you are curious about the difference between the two credits, continue reading below:

Lifetime Learning Credit: Non-refundable credit. Tax Example: If your tax for the year is $1,000 and the allowable credit is $1,500, you cannot yield a refund from the remaining $500. It will be simply a $0 balance due/refund.

American Opportunity Credit: Refundable credit. Tax example: If your tax for the year is $1,000 and the allowable credit is $1,500, you will be refunded the remaining $500.

Andrew K

Thorough answer. Thank you!

stepharizona

The Lifetime Learning Credit has several restrictions. The student must attend what the IRS considers a "qualified college" to claim the credit. A qualified college is one that is eligible to participate in Department of Education student aid programs. So if you're in school, maybe, out of school nope.