School supplies such as pencils, pens, notebooks, erasers, and sharpeners can result in a long list of expenses, but there’s a way to make these costs deductible in the IRS category for education. The ‘trick,’ if it can be called that, lies in where the purchases are made.
It’s important to remember that expenses for these items have not been included in the IRS education bracket for several years.
“Currently, the education deduction in IRS only covers expenses exempt from VAT or subject to a reduced VAT rate of 6%, which excludes school supplies, as these items are taxed at a VAT rate of 23%,” explains the EI financial literacy portal of the Associação Mutualista Montepio.
This situation prevents families from fully utilizing this deduction, which allows a 30% deduction of education expenses, up to a limit of 800 euros, but this cap can be higher if there are expenses related to student accommodation for those who are away from home or living in the interior or Autonomous Regions.
How to Deduct School Supplies in Education Deductions?
However, according to the same portal, “there is a way to bypass the VAT rule that prevents school supplies from being included in the IRS education deduction.”
“Simply purchase these items at schools. This way, they will be exempt from VAT or taxed at a reduced VAT rate of 6%,” states the EI portal.
Furthermore, “buying school supplies at schools has another advantage for family budgets” since “prices are generally more competitive.”
“This strategy to deduct school supplies in the IRS education deduction gained particular significance since 2019. From then on, textbooks, one of the heaviest education expenses, became free up to the 12th grade for students enrolled in public schools and private schools with association contracts. Thus, it became very challenging to reach the deductible limit of 800 euros. To achieve this maximum deduction, families need to present eligible education expenses worth 2,667 euros,” the EI portal notes.
What If It’s Not Possible to Buy School Supplies at Schools?
If acquiring school supplies at schools is not possible, “the only option to deduct these items in the IRS is through the deduction of general family expenses.”
However, “this deduction encompasses all types of expenses and has a limit of only 250 euros per taxpayer (or 500 euros per couple).”
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