Tuition and Fees Deduction
The Tuition and Fees Deduction was set to expire at the end of 2011, but has been extended again through 2014. This deduction is another education tax benefit available to taxpayers who pay for higher education.
The Tuition and Fees Deduction may directly reduce your income subject to tax by up to $4,000. You may be eligible for the Tuition and Fees deduction even if you do not qualify for the American Opportunity Credit or the Lifetime Learning Credit.
Which education benefit is right for you? TurboTax will ask you questions and show you the best options.
Now that congress has extended the Tuition and Fees Deduction, taxpayers may benefit from the following:
- Up to a $4,000 reduction in income subject to tax.
- Deduction can be claimed even if you do not itemize deductions.
- Reduces AGI, which may qualify you for other tax deductions and credits.
- No limit on the number of years the deduction can be taken.
- Doesn't matter how many college courses you are taking at once.
You may be asking...
There are a few requirements to qualify for the Tuition and Fees Deduction:
- You paid qualified education expenses of higher education.
- You paid education expenses for an eligible student. .
- The eligible student is you, your spouse, or your dependent who you can claim as an exemption on your return.
- Your modified adjusted gross income (MAGI) is less than $80,000 ($160,000 if married filing jointly).
You are not eligible to claim the Tuition and Fees Deduction if any of the following applies:
- Your filing status is Married Filing Separately (MFS).
- Another person can claim an exemption of the student on his or her tax return. You cannot take the deduction even if the other person does not actually claim that exemption.
- You or your spouse was a non-resident alien for any part of 2014 and the non-resident alien did not elect to be treated as a resident alien for tax purposes
- You or anyone else claims an American Opportunity or Lifetime Lifetime Learning Credit in 2014
- with respect to expenses of the student for whom the qualified education expenses were paid.
The following expenses qualify for the Tuition and Fees Deduction:
- Qualified expenses paid for yourself, your spouse, or a dependent who you claim as an exemption on your tax return.
- Qualified expenses paid in 2014 for enrollment during 2014 or paid for the first 3 months of 2015.
- Tuition and certain related expenses required for enrollment or attendance at an eligible educational institution.
- Student-activity fees and expense for course-related books, supplies, and equipment only if the fees are paid to the institution as a condition of enrollment or attendance.
The following expenses do not qualify for the Tuition and Fees Deduction:
- Room and board
- Medical Expenses(including student health fees)
- Similar personal, living, or family expenses
- Courses of instruction that involve sports, games, or hobbies, or any non-credit course unless course of instruction is part of the degree program
An eligible educational institution is any college, university, vocational school, or post-secondary educational institution eligible to participate in a student aid program administered by the US Department of Education.
It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) post secondary institutions.
The following are necessary to be considered an eligible student:
- The student is you, your spouse, or your dependent who you can claim as an exemption on your tax return.
- The student is enrolled in one or more courses at an eligible educational institution.
- The student must have either a high school diploma or GED.
You should receive Form 1098-T from an eligible educational institution by February 15. The institution may choose to report either payment received (box 1), or amounts billed (box 2).
For more information on Form 1098-T click on Form 1098-T: Tuition Statement.
Don’t worry about how to figure out education deductions, TurboTax guides you through what expenses to enter and shows you the best choices.
Either you or your dependent can claim the Tuition and Fees Deduction, but not both of you.
The rules regarding who can claim the Tuition and Fees deduction are a little different from the rules for claiming the education credits.
Generally, in order to claim the Tuition and Fees deduction for a dependent, you must:
- Have paid the expenses, and
- Claim the exemption for the student as a dependent.
Under the Education Credits rules, if your dependent pays for qualified expenses and you claim the student as a dependent, you would be able to take the credit.
However, under the Tuition and Fees Deduction no one would be allowed to take the deduction in this situation.
These rules can be a little complicated, but TurboTax asks the right questions to figure out the deduction.
As a tax planning tool you may want to use the chart below so that both you and your dependent don’t miss out on the deduction in the future.
|Your Dependent Paid All Qualified Expenses||You Paid All Qualified Expenses||Your Relative Paid All Qualified Expenses|
Claim an exemption for your dependent
||No one is allowed to take a deduction||Only you can take the deduction||No one is allowed to take the deduction|
Do not claim exemption, but are eligible
||No one is allowed to take the deduction||No one is allowed to take the deduction||No one is allowed to take the deduction|
|Are not eligible to claim an exemption for your dependent||Only your dependent can take the deduction||Only your dependent can deduct the amount you paid. The amount you paid is treated as a gift to your dependent||Only your dependent can take the deduction|
No. There are no double benefits allowed. You have to choose either the Tuition and Fees Deduction or one of the Education Credits.
Not sure which alternative is best? TurboTax will show you the deduction or credit that gives you the greatest tax benefit.
The amount of your deduction can depend on the amount of your modified adjusted gross income (MAGI). If you file as:
- Single or Head of Household and your MAGI is less than $65,000, then your maximum tuition and fees deduction is $4,000.
- Single or Head of Household and your MAGI is between $65,000 and $80,000, your maximum tuition and fees deduction is $2,000.
- Married Filing Jointly and your MAGI is less than $130,000, your maximum deduction is $4,000.
- Married Filing Jointly and your MAGI is between $130,000 and $160,000, your maximum deduction is $2,000.
- If your Single (Head of Household) MAGI is over $80,000 ($160,000 married filing jointly), then your tuition and fees deduction is zero (0).