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Update: Classroom Materials Deduction and College Tuition and Expense Deduction Pass in Final Days of 109th CongressJanuary 2, 2007—H.R. 6411 the tax extender legislation passed in final act of the 109th Congress. The House and Senate voted to amend the IRS Code of 1986 and extend the education deduction for college tuition, the work opportunity and welfare-to-work credits, the teacher deduction for out-of-pocket expenses they have to purchase classroom materials, and other credits. Even though the measures passed, they will not be on the 2006 Tax Forms available in January. Families and teachers will need to find out how to write in or what forms they will need in order to take the deductions. Read the bill. Education Tax Breaks Expire – What That Means for 2006 FilingsDec. 4, 2006—Two of the most popular education tax breaks expired in Dec. 2005. They are the deduction parents can take for college tuition and fees and the deduction for classroom materials purchased by teachers. Unless the lame duck congress can pass the budget bills this week, the deductions will expire until they are reauthorized when the 110th congress is installed in January. Both provisions have bi-partisan support and are likely to stay on the books. Unfortunately, the IRS is past their deadline for ordering their tax forms, and the deductions are unlikely to be on the 2006 forms. When the deductions are finalized, the IRS will provide instructions on how families and teachers can take the deduction by writing them in. The college tuition and fees deduction is widely used. According to IRS data, 3.7 million families and individuals claimed this deduction in 2004. In addition, millions of teachers who provide their students with classroom supplies take the classroom supplies deduction up to $250. According to the IRS data, 2.66 million teachers claimed this deduction in 2004. The Tax Staff of the Senate Finance Committee explained the problem this way: Delays in enacting the "extenders" legislation will have a significant adverse impact on tax administration. Because these provisions expired at the end of 2005, the 2006 draft tax forms do not currently include them. If these provisions are extended, the forms must be revised. Because of contractual deadlines with the vendors who print these forms, the Internal Revenue Service (IRS) is running out of time to revise the final forms and still be able to deliver them in time for the next filing season. This memorandum confirms Finance Committee tax staff discussions with the IRS. The tax law must be changed for these deductions to be extended. If these deductions are not extended prior to October 15, 2006, the IRS will have to rely on the law as it at that time. According to the IRS, this means the IRS will be required to prepare for printing without lines on the tax forms to claim these deductions. If the deductions are extended after the printing process is complete, the IRS will issue supplemental instructions on how to enter the deductions as write-in entries on the tax forms. These supplemental materials can result in an increased number of taxpayer errors, including failure to properly claim a deduction for which a taxpayer is eligible. | ||||
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