How to claim educational expense?

[286CSO]

What is the name of your state? MN

Ok, so I need a bit of help. Question: In MN, I can claim a certain amount of educational expenses. So I pulled together my curriculum receipts and receipts from piano lessons for DS6.

When I received our tax statement from the music school it showed that we paid only $100 in tuition. We actually paid tuition for the 2019-2020 school year (roughly $600).

They told me that the amount they report in the end of year is the amount paid toward lessons given in that year. So they report the amount for the four lessons he had in 2019.
I’m pretty sure in order to claim the credit, I can only report the amount paid in that tax year.

Can anyone shed light on this for me?

 

[Just Blue]

@Taxing Matters

 

[LdiJ]

What is the name of your state? MN

Ok, so I need a bit of help. Question: In MN, I can claim a certain amount of educational expenses. So I pulled together my curriculum receipts and receipts from piano lessons for DS6.

When I received our tax statement from the music school it showed that we paid only $100 in tuition. We actually paid tuition for the 2019-2020 school year (roughly $600).

They told me that the amount they report in the end of year is the amount paid toward lessons given in that year. So they report the amount for the four lessons he had in 2019.
I’m pretty sure in order to claim the credit, I can only report the amount paid in that tax year.

Can anyone shed light on this for me?

You would first need to confirm that piano lessons would count as an educational expense. I assume that they will since the school issues tax statements but its best to confirm.

However, its almost a guarantee that you can only claim what was actually paid during that tax year.

 

[286CSO]

You would first need to confirm that piano lessons would count as an educational expense. I assume that they will since the school issues tax statements but its best to confirm.

However, its almost a guarantee that you can only claim what was actually paid during that tax year.

It is an allowed expense, taught by a qualified instructor.
And that is what I thought.

I am currently using the bank statement reflecting my payment as proof, waiting for them to provide a revised statement reflecting whatI paid in 2019.

 

[Taxing Matters]

Can anyone shed light on this for me?

There are two common ways prepaid expenses for services are treated depending on the jurisdiction. Some would allow the full amount as a deduction in the year paid even if part of the services are provided in the next year. Other jurisdictions would prorate the prepayment over the number of classes (or whatever) that is provided in the tax year such that while you paid the full amount in 2019 the portion that is properly allocated to classes actually taken in 2020 must be deferred to 2020 and not taken in 2019. It appears that Minnesota takes the former approach — you deduct the full amount in the year paid even though some of the lessons may occur in the following year. Specifically, the MN Department of Revenue page on the education credit and deduction (what the state calls a subtraction) states the following:

When to Claim Qualifying Expenses​

You claim educational expenses for the year when you paid for the materials or services, which may be different from the year you received them. It depends how you paid for them:​

• If you bought an educational service or product using a “third-party” loan – such as from a bank, or with a credit card – claim the expenses for the year of purchase. (This is true even if you don’t repay the loan until a later year.)
• If you used credit provided by a retail seller for the purchase – such as a payment plan from a computer or music store – claim the expenses for year(s) you actually make payments to the seller.

Example​

You bought a musical instrument on store credit in September and make 10 monthly payments of $50 each ($500 total). You claim four payments ($200) as educational expense for the current year, and claim the remaining six payments ($300) for the next year. However, if you bought the same instrument with a bank loan or a credit card, you claim the full amount ($500) for the current year.​

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