Federal Tax Deduction
Tuition and Fees Deduction
The Tuition and Fees Tax Deduction can reduce the amount of your taxable income by as much as $4,000 per year. This deduction is subtracted from your income, which means you can claim this deduction even if you do not itemize your deductions on Schedule A of Form 1040.
- This deduction may benefit you if you do not qualify for either the Hope or Lifetime Learning Education Tax Credits.
- You may deduct up to $4,000 in tuition and fees required for enrollment or attendance at an eligible postsecondary institution. You may not deduct expenses for personal, living, or family expenses, including room and board, insurance, medical expenses, or transportation.
- The exact amount of the Tuition and Fees Tax Deduction depends on the qualified tuition and related expenses that you pay for yourself, your spouse, or a dependent for whom you are entitled to claim an exemption on your tax return.
- Your family may claim this deduction along with a Hope credit, a Lifetime Learning credit, and an exclusion from gross income for certain distributions from qualified State tuition programs or education IRAs, as long as the same student is not used as the basis for each deduction, credit, or exclusion and the family does not exceed the Lifetime Learning maximum per family.
The Taxpayer: an eligible taxpayer must:
- file a federal tax return to claim the Tuition and Fees Tax Deduction.
- must claim an eligible student (one who is enrolled in one or more courses at an eligible educational institution) as a dependent on the tax return, unless the deduction is for the taxpayer or the taxpayer's spouse.
The amount of qualified education expenses you may take into account in figuring your Tuition And Fees Deduction increases from $3,000 to $4,000 if your modified adjusted gross income (MAGI) is not more than $65,000 ($130,000 if you are married filing jointly). If your MAGI is larger than $65,000 ($130,000 if you are married filing jointly), but is not more than $80,000 ($160,000 if you are married filing jointly), your maximum Tuition And Fees Deduction is $2,000. No Tuition And Fees Deduction is allowed if your MAGI is larger than $80,000 ($160,000 if you are married filing jointly).
An eligible student must be enrolled in one or more courses at an eligible educational institution. An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education.
According to the IRS, "it includes virtually all accredited, public, nonprofit, and proprietary postsecondary institutions." The college you attend can help you figure out whether they meet this requirement. You may claim the deduction yourself if you are not claimed as a dependent by another taxpayer.
Interest Deduction for Education Loans
When you or your parents pay interest on a student loan the Internal Revenue Service allows you to subtract the interest from your income on the tax return. This deduction is subject to income limits.
Coverdell Education Savings Account
A Coverdell ESA account is set up to pay qualified education expenses of a designated beneficiary.
If your modified adjusted gross income (MAGI) is less than $110,000 ($220,000 if filing a joint return), you may be able to establish a Coverdell to finance the qualified education expenses of a designated beneficiary. For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return.
For a designated beneficiary total contributions in any year cannot be more than $2,000. Contributions to a Coverdell are not deductible but amounts deposited in the account grow tax free until you need the funds to pay tuition and fees.
Employer Provided Education Assistance
If your employer provides tuition assistance it is likely that it is a tax-free benefit. Employers can pay up to $5,250 of your tuition, fees, books and supplies each year tax-free.