If you, or a member of your family, attended college last year, you may be eligible to deduct up to $4,000 in education expenses. The following nine education tax benefit FAQ's will help you quickly determine if you can take advantage of this tax break.
- What is the tax benefit of the tuition and fees deduction?
- Who can claim the deduction?
- Who can't claim the deduction?
- Are there limits on how much I can claim?
- What tuition and fees are deductible?
- What expenses qualify?
- How do GI Bill or military tuition assistance affect my education deductions?
- How do I claim education tax deductions?
- What's the difference between deductions and credits?
What is the tax benefit of the tuition and fees deduction?
The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000. This deduction is taken as an adjustment to income. This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). This deduction may be beneficial to you if you cannot take either the Hope or Lifetime Learning credit because your income is too high.
Who can claim the deduction?
Generally, you can claim the tuition and fees deduction if all three of the following requirements are met.
- You pay qualified education expenses of higher education.
- You pay the education expenses for an eligible student.
- The eligible student is yourself, your spouse, or your dependent for whom you claim an exemption on your tax return.
Who can't claim the deduction?
You cannot claim the tuition and fees deduction if any of the following apply.
- Your filing status is married filing separately.
- Another person can claim an exemption for you as a dependent on his or her tax return. You cannot take the deduction even if the other person does not actually claim that exemption.
- Your modified adjusted gross income (MAGI) is more than $80,000 ($160,000 if filing a joint return).
- You were a nonresident alien for any part of the year and did not elect to be treated as a resident alien for tax purposes. More information on nonresident aliens can be found in Publication 519, U.S. Tax Guide for Aliens.
- You or anyone else claims a Hope or Lifetime Learning credit in 2007 with respect to expenses of the student for whom the qualified education expenses were paid.
Are there limits on how much I can claim?
If your modified adjusted gross income (MAGI)* is not more than $65,000 ($130,000 if you are married filing jointly), your maximum tuition and fees deduction is $4,000. If your MAGI is larger than $65,000 ($130,000), but is not more than $80,000 ($160,000 if you are married filing jointly), your maximum deduction is $2,000. No tuition and fees deduction is allowed if your MAGI is larger than $80,000 ($160,000)
*Modified adjusted gross income (MAGI) is your adjusted gross income as figured on their federal income tax return before subtracting any deduction for tuition and fees, which may be modified by several factors that do not normally apply to military servicemembers. Visit the IRS website to learn more about the MAGI.
What tuition and fees are deductible?
Tuition and fees required for enrollment or attendance at an eligible post-secondary educational institution, but not including personal, living, or family expenses, such as room and board.
What expenses qualify?
The tuition and fees deduction is based on qualified education expenses you pay for yourself, your spouse, or your dependent for whom you claim an exemption on your tax return. Generally, the deduction is allowed for qualified education expenses paid in 2007 in connection with enrollment at an institution of higher education during 2007 or for an academic period beginning in 2007 or in the first 3 months of 2008.
How do GI Bill or military tuition assistance affect my education deductions?
If you pay qualified education expenses with certain tax-free funds (GI Bill, Pell grants, military tuition assistance, employer-provided assistance), you cannot claim a deduction for those amounts. You may only claim expenses that are not covered or exceed the amount of tax-free assistance you received.
How do I claim education tax deductions?
You claim a tuition and fees deduction by completing Form 8917 and submitting it with your Form 1040 or Form 1040A. Enter the deduction on Form 1040, line 34, or Form 1040A, line 19.
What is the difference between deductions and credits?
Tax deductions are expenses the Internal Revenue Service allows you to use to your adjusted gross income (AGI). A tax credit is an income tax credit that directly reduces your income tax. The Hope Education or Lifetime Learning credits are examples of tax credits that directly reduce your taxes.
