EDUCATIONAL EXPENSES
See also: IRS Publication 970 Tax Benefits for Education
Back-to-School Reminder for Parents and Students: Check Out College Tax Credits for 2015 and Years Ahead
WASHINGTON - With another school year just around the corner, the Internal Revenue Service today reminded parents and students that now is a good time to see if they will qualify for either of two college tax credits or other education-related tax benefits when they file their 2015 federal income tax returns.
In general, the American Opportunity Tax Credit or Lifetime Learning Credit is available to taxpayers who pay qualifying expenses for an eligible student. Eligible students include the taxpayer, spouse and dependents. The American Opportunity Tax Credit provides a credit for each eligible student, while the Lifetime Learning Credit provides a maximum credit per tax return.
Though a taxpayer often qualifies for both of these credits, he or she can only claim one of them for a particular student in a particular year. To claim these credits on their ta return, the taxpayer must file Form 1040 or 1040A and complete Form 8863, Education Credits.
The credits apply to eligible students enrolled in an eligible college, university or vocational school, including both nonprofit and for-profit institutions. The credits are subject to income limits that could reduce the amount claimed on their tax return.
To help determine eligibility for these benefits, taxpayers should visit the Education Credits Web page or use the IRS's Interactive Tax Assistant tool Both are available on IRS.gov.
Normally, a student will receive a Form 1098-T from their institution by January 31 of the following year. (For 2015, the due date is February 1, 2016 because otherwise it would fall on a Sunday.) This form will show information about tuition paid or billed along with other information. However, amounts shown on this form may differ from amounts taxpayers are eligible to claim for these tax credits. Taxpayers should see the instructions to Form 8863 and Publication 970 for details on properly figuring allowable tax benefits.
Many of those eligible for the American Opportunity Tax Credit qualify for the maximum annual credit of $2,500 per student. Students can claim this credit for qualified education expenses paid during the entire tax year for a certain number of years:
Here are some more key features of the credit:
The Lifetime Learning Credit of u to $2,000 per tax return is available for both graduate and undergraduate students. Unlike the American Opportunity Tax Credit, the limit on the Lifetime Learning Credits applies to each tax return, rather than to each student. Also, the Lifetime Learning Credit does not provide a benefit to people who owe no tax.
Though the half-time student requirement does not apply to the lifetime learning credit, the course of study must be either part of a post-secondary degree program or taken by the student to maintain or improve job skills. Other features of the credit include:
Eligible parents and students can get the benefit of these credits during the year by have less tax taken out of their paychecks. They can do this by filing out a new Form @-4, claiming additional withholding allowances, and giving it to their employer.
There are a variety of other education-related tax benefits that can help many taxpayers. They include:
Taxpayers with qualifying children who are students up to age 24 may be able to claim a dependent exemption and the Earned Income Tax Credit.
The general comparison table in Publication 970 can be a useful guide to taxpayers in determining eligibility for these benefits. Details can also be found in the Tax Benefits for Education Information Center on IRS.gov.
In general, the American Opportunity Tax Credit or Lifetime Learning Credit is available to taxpayers who pay qualifying expenses for an eligible student. Eligible students include the taxpayer, spouse and dependents. The American Opportunity Tax Credit provides a credit for each eligible student, while the Lifetime Learning Credit provides a maximum credit per tax return.
Though a taxpayer often qualifies for both of these credits, he or she can only claim one of them for a particular student in a particular year. To claim these credits on their ta return, the taxpayer must file Form 1040 or 1040A and complete Form 8863, Education Credits.
The credits apply to eligible students enrolled in an eligible college, university or vocational school, including both nonprofit and for-profit institutions. The credits are subject to income limits that could reduce the amount claimed on their tax return.
To help determine eligibility for these benefits, taxpayers should visit the Education Credits Web page or use the IRS's Interactive Tax Assistant tool Both are available on IRS.gov.
Normally, a student will receive a Form 1098-T from their institution by January 31 of the following year. (For 2015, the due date is February 1, 2016 because otherwise it would fall on a Sunday.) This form will show information about tuition paid or billed along with other information. However, amounts shown on this form may differ from amounts taxpayers are eligible to claim for these tax credits. Taxpayers should see the instructions to Form 8863 and Publication 970 for details on properly figuring allowable tax benefits.
Many of those eligible for the American Opportunity Tax Credit qualify for the maximum annual credit of $2,500 per student. Students can claim this credit for qualified education expenses paid during the entire tax year for a certain number of years:
- The credit is only available for four tax years per eligible student
- The credit is available only if the student has not completed the first four years of post-secondary education before 2015.
Here are some more key features of the credit:
- Qualified education expenses are amounts paid for tuition, fees and other related expenses for an eligible student. Other expenses, such as room and board, are not qualified expenses.
- The credit equals 100 percent of the first $2,000 spend and 25 percent of the next $2,000. That means the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualified expenses for an eligible student.
- Forty percent of the American Opportunity Tax Credit is refundable. This means that even people who owe no tax can get an annual payment of up to $1,000 for each eligible student.
- The full credit can only be claimed by taxpayers whose modified adjusted gross income (MAGI) is $80,000 or less. For married couples filing a joint return, the limit is $160,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $180,00 or more and singles, heads of household and some widows and widowers whose MAGI is $90,000 or more.
The Lifetime Learning Credit of u to $2,000 per tax return is available for both graduate and undergraduate students. Unlike the American Opportunity Tax Credit, the limit on the Lifetime Learning Credits applies to each tax return, rather than to each student. Also, the Lifetime Learning Credit does not provide a benefit to people who owe no tax.
Though the half-time student requirement does not apply to the lifetime learning credit, the course of study must be either part of a post-secondary degree program or taken by the student to maintain or improve job skills. Other features of the credit include:
- Tuition and fees required for enrollment or attendance qualify as do other fees required for the course. Additional expenses do not.
- The credit equals 20 percent of the amount spent on eligible expenses across all students on the return. That means the full $2,000 credit is only available to the taxpayer who pays $10000 or more in qualifying tuition and fees and has sufficient tax liability.
- Income limits are lower than under the American Opportunity Tax Credit. For 2015, the full credit can be claimed by taxpayers whose MAGI is $55,000 or less. For married couples filing a joint return, the limit is $110,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $130,000 or more or singles, heads of household and some widows and widowers whose MAGI is $65,000 or more.
Eligible parents and students can get the benefit of these credits during the year by have less tax taken out of their paychecks. They can do this by filing out a new Form @-4, claiming additional withholding allowances, and giving it to their employer.
There are a variety of other education-related tax benefits that can help many taxpayers. They include:
- Scholarship and fellowship grants - generally tax-free if used to pay for tuition, required enrollment fees, books and other course materials, but taxable if used for room, board, research, travel or other expenses.
- Student loan interest deduction of up to $2,500 per year.
- Savings bonds used to pay for college - though income limits apply, interest is usually tax-free if bonds were purchased after 1989 by a taxpayer who, at time of purchase, was at least 24 years old.
- Qualified tuition programs, also called 529 plans, used by many families to prepay or save for a child's college education.
Taxpayers with qualifying children who are students up to age 24 may be able to claim a dependent exemption and the Earned Income Tax Credit.
The general comparison table in Publication 970 can be a useful guide to taxpayers in determining eligibility for these benefits. Details can also be found in the Tax Benefits for Education Information Center on IRS.gov.
Back-to-School Education Tax Credits
If you, your spouse or a dependent are heading off to college in the fall, some of your costs may save you money at tax time. You may be able to claim a tax credit on your federal tax return. Here are some key IRS tips that your should know about education tax credits:
Visit IRS.gov and use the Interactive Tax Assistant tool to see if you are eligible to claim education credits. Visit the IRS Education Credits web page to learn more. Also see Publication 970, Tax Benefits for Education. You can get it on IRS.gov.
- American Opportunity Tax Credit (AOTC). The AOTC is wroth up to $2,500 per year for an eligible student. You may claim this credit only for the first four years of higher educaiton. Forty percent of the AOTC is refundable. That means if you are eligible, you can get up to $1,000 of the credit as a refund, even if you do not owe any taxes.
- Lifetime Learning Credit (LLC). The LLC is worth up to $2,000 on your tax return. There is not limit on the number of years that you can claim the LLC for an eligible student.
- One credit per student. You can claim only one type of education credit per student on your tax return each year. If more than one student qulifies for a credit in the same year, you can claim a different credit for each student. For instance, you can claim the OATC for one students, and claim the LLC for the other.
- Qualified expenses. You may use qualified expenses to figure your credit. these include the costs you pay for tuition, fees and other elated expenses for an eligible student. Refer to IRS.gov for more on the rules that apply to each credit.
- Eligible education institutions. Eligible schools are those that offer education beyond high school. This includes most colleges and universities. Vocations schools or other post-secondary schools may also qualify. If your aren't sure if your school is eligible:
- Ask our school if it is an eligible education institutions,or
- See if your school is on the U.S. Department of Education's Accreditation database.
- Form 1098-T. In most cases, your should receive Form 1098-T, Tuition Statement, from your school by Feb 1, 2016. This form reports your qualified expenses to the IRS and to you. the amounts shown on the form may be different than the amounts you actually paid. That might happen because some of your related costs may not appear on the form. For instances, the cost of your textbooks may not appear on the form. However, you still may be able to include those costs when your figure your credit. Don't forget that you can only claim an education credit for the qualified expenses that you paid in that same tax year.
- Nonresident alien. If you are in the United States on an F-1 Student Visa, the tax rules generally treat you as a nonresident alien for federal tax purposes. To find out more about your F-1 Student Visa status, visit U.S. Immigration Support. To learn more about resident and nonresident alien status and restrictions on claiming the education credits, refer to Publication 519, U.S. Tax Guide for Aliens.
- Income limits. These credits are subject to income limitations and may be reduced or eliminated, based on your income.
Visit IRS.gov and use the Interactive Tax Assistant tool to see if you are eligible to claim education credits. Visit the IRS Education Credits web page to learn more. Also see Publication 970, Tax Benefits for Education. You can get it on IRS.gov.
Education Tax Credits: Two Benefits to Help You Pay for College
Did you pay for college in 2014? If you did it can mean tax savings on your federal tax return. There are two education credits that can help you with the cost of higher education. The credits may reduce the amount of tax you owe on your tax return. Here are some important facts you should know about education tax credits.
American Opportunity Tax Credit:
American Opportunity Tax Credit:
- You may be able to claim up to $2,500 per eligible student.
- The credit applies to the first four years at an eligible college or vocational school.
- It reduces the amount of tax you owe. If the credit reduces your tax to less than zero, you may receive up to $1,000 as a refund.
- It is available for students earning a degree or other recognized credential.
- The credit applies to students going to school at least half-time for at least one academic period that started during the tax year
- Costs that apply to the credit include the cost of tuition, books and required fees and supplies.
- Lifetime Learning Credit:
- The credit is limited to $2,000 per tax return, per year.
- The credit applies to all years of higher education. This includes classes for learning or improving job skills.
- The credit is limited to the amount of your taxes.
- Costs that apply to the credit include the cost of tuition, required fees, books, supplies and equipment that you must buy from the school.
- The credits apply to an eligible student. Eligible students include yourself, your spouse or a dependent that you list on your tax return.
- You must file Form 1040A or Form 1040 and complete Form 8863, Education Credits, to claim these credits on your tax return.
- Your school should give you a Form 1098-T, Tuition Statement, showing expenses for the year. This form contains helpful information needed to complete Form 8863. The amounts shown in Boxes 1 and 2 of the form may be different than what you actually paid. For example, the form may not include the cost of books that qualify for the credit.
- You can’t claim either credit if someone else claims you as a dependent.
- You can’t claim both credits for the same student or for the same expense, in the same year.
- The credits are subject to income limits that could reduce the amount you can claim on your return.
- Visit IRS.gov and use the Interactive Tax Assistant tool to see if you’re eligible to claim these credits. Also visit the IRS Education Credits Web page to learn more. If you can’t claim a tax credit, check the other tax benefits you might be able to claim.
Back-to-School Reminder for Parents and Students: Check Out College Tax Credits for 2014 and Years Ahead
WASHINGTON ― With another school year now in full swing, the Internal Revenue Service today reminded parents and students that now is a good time to see if they will qualify for either of two college tax credits or any of several other education-related tax benefits when they file their 2014 federal income tax returns.
In general, the American opportunity tax credit and lifetime learning credit are available to taxpayers who pay qualifying expenses for an eligible student. Eligible students include the taxpayer and his or her spouse and dependents. The American opportunity tax credit provides a credit for each eligible student, while the lifetime learning credit provides a maximum credit per tax return. Though a taxpayer often qualifies for both of these credits, he or she can only claim one of them for a particular student in a particular year. Claimed on Form 8863, these credits are available to all taxpayers — both those who itemize their deductions on Schedule A and those who claim a standard deduction.
For those eligible, including most undergraduate students, the American opportunity tax credit will generally yield the greater tax savings. Alternatively, the lifetime learning credit should be considered by part-time students and those attending graduate school.
Both credits are available for students enrolled in an eligible college, university or vocational school, including both nonprofit and for-profit institutions. Neither credit can be claimed by a nonresident alien, a married person filing a separate return or someone claimed as a dependent on another person’s return.
Normally, a student will receive a Form 1098-T from their institution by the end of January of the following year (Jan. 31, 2015 for calendar year 2014). This form will show information about tuition paid or billed along with other information. However, amounts shown on this form may differ from amounts taxpayers are eligible to claim for these tax credits. Taxpayers should see the instructions to Form 8863 and Publication 970 for details on properly figuring allowable tax benefits.
Many of those eligible for the American opportunity tax credit qualify for the maximum annual credit of $2,500 per student. Students can claim this credit for qualified educational expenses paid during the entire tax year for a certain number of years:
Here are some more key features of the credit:
The lifetime learning credit of up to $2,000 per tax return is available for both graduate and undergraduate students. Unlike the American opportunity tax credit, the limit on the lifetime learning credit applies to each tax return, rather than to each student. Also, the lifetime learning credit does not provide a benefit to people who owe no tax.
Though the half-time student requirement does not apply to the lifetime learning credit, the course of study must be either part of a post-secondary degree program or taken by the student to maintain or improve job skills. Other features of the credit include:
You can use the IRS’s Interactive Tax Assistant tool to help determine if you are eligible for these benefits. The tool is available on IRS.gov. Eligible parents and students can get the benefit of these credits during the year by having less tax taken out of their paychecks. They can do this by filling out a new Form W-4, claiming additional withholding allowances, and giving it to their employer.
There are a variety of other education-related tax benefits that can help many taxpayers. They include:
Taxpayers with qualifying children who are students up to age 24 may be able to claim a dependent exemption and the earned income tax credit.
In general, the American opportunity tax credit and lifetime learning credit are available to taxpayers who pay qualifying expenses for an eligible student. Eligible students include the taxpayer and his or her spouse and dependents. The American opportunity tax credit provides a credit for each eligible student, while the lifetime learning credit provides a maximum credit per tax return. Though a taxpayer often qualifies for both of these credits, he or she can only claim one of them for a particular student in a particular year. Claimed on Form 8863, these credits are available to all taxpayers — both those who itemize their deductions on Schedule A and those who claim a standard deduction.
For those eligible, including most undergraduate students, the American opportunity tax credit will generally yield the greater tax savings. Alternatively, the lifetime learning credit should be considered by part-time students and those attending graduate school.
Both credits are available for students enrolled in an eligible college, university or vocational school, including both nonprofit and for-profit institutions. Neither credit can be claimed by a nonresident alien, a married person filing a separate return or someone claimed as a dependent on another person’s return.
Normally, a student will receive a Form 1098-T from their institution by the end of January of the following year (Jan. 31, 2015 for calendar year 2014). This form will show information about tuition paid or billed along with other information. However, amounts shown on this form may differ from amounts taxpayers are eligible to claim for these tax credits. Taxpayers should see the instructions to Form 8863 and Publication 970 for details on properly figuring allowable tax benefits.
Many of those eligible for the American opportunity tax credit qualify for the maximum annual credit of $2,500 per student. Students can claim this credit for qualified educational expenses paid during the entire tax year for a certain number of years:
- The credit is only available for 4 tax years per eligible student.
- The credit is available only if the student has not completed the first 4 years of post-secondary education before 2014.
Here are some more key features of the credit:
- Qualified education expenses are amounts paid for tuition, fees and other related expenses for an eligible student. Other expenses, such as room and board, are not qualified expenses.
- The credit equals 100 percent of the first $2,000 spent and 25 percent of the next $2,000. That means the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualified expenses for an eligible student.
- The full credit can only be claimed by taxpayers whose modified adjusted gross income (MAGI) is $80,000 or less. For married couples filing a joint return, the limit is $160,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $180,000 or more and singles, heads of household and some widows and widowers whose MAGI is $90,000 or more.
- Forty percent of the American opportunity tax credit is refundable. This means that even people who owe no tax can get an annual payment of up to $1,000 for each eligible student.
The lifetime learning credit of up to $2,000 per tax return is available for both graduate and undergraduate students. Unlike the American opportunity tax credit, the limit on the lifetime learning credit applies to each tax return, rather than to each student. Also, the lifetime learning credit does not provide a benefit to people who owe no tax.
Though the half-time student requirement does not apply to the lifetime learning credit, the course of study must be either part of a post-secondary degree program or taken by the student to maintain or improve job skills. Other features of the credit include:
- Tuition and fees required for enrollment or attendance qualify as do other fees required for the course. Additional expenses do not.
- The credit equals 20 percent of the amount spent on eligible expenses across all students on the return. That means the full $2,000 credit is only available to a taxpayer who pays $10,000 or more in qualifying tuition and fees and has sufficient tax liability.
- Income limits are lower than under the American opportunity tax credit. For 2014, the full credit can be claimed by taxpayers whose MAGI is $54,000 or less. For married couples filing a joint return, the limit is $108,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $128,000 or more and singles, heads of household and some widows and widowers whose MAGI is $64,000 or more.
You can use the IRS’s Interactive Tax Assistant tool to help determine if you are eligible for these benefits. The tool is available on IRS.gov. Eligible parents and students can get the benefit of these credits during the year by having less tax taken out of their paychecks. They can do this by filling out a new Form W-4, claiming additional withholding allowances, and giving it to their employer.
There are a variety of other education-related tax benefits that can help many taxpayers. They include:
- Scholarship and fellowship grants — generally tax-free if used to pay for tuition, required enrollment fees, books and other course materials, but taxable if used for room, board, research, travel or other expenses.
- Student loan interest deduction of up to $2,500 per year.
- Savings bonds used to pay for college — though income limits apply, interest is usually tax-free if bonds were purchased after 1989 by a taxpayer who, at time of purchase, was at least 24 years old.
- Qualified tuition programs, also called 529 plans, used by many families to prepay or save for a child’s college education.
Taxpayers with qualifying children who are students up to age 24 may be able to claim a dependent exemption and the earned income tax credit.
Two Tax Credits Help Pay Higher Education Costs
Did you, your spouse or your dependent take higher education classes last year? If so, you may be able to claim the American Opportunity Credit or the Lifetime Learning Credit to help cover the costs. Here are some facts from the IRS about these important credits.
The American Opportunity Credit is:
The Lifetime Learning Credit is:
For both credits:
The American Opportunity Credit is:
- Worth up to $2,500 per eligible student.
- Only available for the first four years at an eligible college or vocational school.
- Subtracted from your taxes but can also give you a refund of up to $1,000 if it’s more than your taxes.
- For students earning a degree or other recognized credential.
- For students going to school at least half-time for at least one academic period that started during the tax year.
- For the cost of tuition, books and required fees and supplies.
The Lifetime Learning Credit is:
- Limited to $2,000 per tax return, per year, no matter how many students qualify.
- For all years of higher education, including classes for learning or improving job skills.
- Limited to the amount of your taxes.
- For the cost of tuition and required fees, plus books, supplies and equipment you must buy from the school.
For both credits:
- Your school should give you a Form 1098-T, Tuition Statement, showing expenses for the year. Make sure it’s correct.
- You must file Form 8863, Education Credits, to claim these credits on your tax return.
- You can’t claim either credit if someone else claims you as a dependent.
- You can’t claim both credits for the same student or for the same expense, in the same year.
- The credits are subject to income limits that could reduce the amount you can claim on your return.
- Visit IRS.gov and use the Interactive Tax Assistant tool to see if you’re eligible to claim these credits.
Parents and Students: Check Out College Tax Benefits for 2012 and Years Ahead
WASHINGTON — The Internal Revenue Service today reminded parents and students that now is a good time to see if they qualify for either of two college education tax credits or any of several other education-related tax benefits.
In general, the American opportunity tax credit, lifetime learning credit and tuition and fees deduction are available to taxpayers who pay qualifying expenses for an eligible student. Eligible students include the primary taxpayer, the taxpayer’s spouse or a dependent of the taxpayer.
Though a taxpayer often qualifies for more than one of these benefits, he or she can only claim one of them for a particular student in a particular year. The benefits are available to all taxpayers – both those who itemize their deductions on Schedule A and those who claim a standard deduction. The credits are claimed on Form 8863 and the tuition and fees deduction is claimed on Form 8917.
The American Taxpayer Relief Act, enacted Jan. 2, 2013, extended the American opportunity tax credit for another five years until the end of 2017. The new law also retroactively extended the tuition and fees deduction, which had expired at the end of 2011, through 2013. The lifetime learning credit did not need to be extended because it was already a permanent part of the tax code.
For those eligible, including most undergraduate students, the American opportunity tax credit will yield the greatest tax savings. Alternatively, the lifetime learning credit should be considered by part-time students and those attending graduate school. For others, especially those who don’t qualify for either credit, the tuition and fees deduction may be the right choice.
All three benefits are available for students enrolled in an eligible college, university or vocational school, including both nonprofit and for-profit institutions. None of them can be claimed by a nonresident alien or married person filing a separate return. In most cases, dependents cannot claim these education benefits.
Normally, a student will receive a Form 1098-T from their institution by the end of January of the following year. This form will show information about tuition paid or billed along with other information. However, amounts shown on this form may differ from amounts taxpayers are eligible to claim for these tax benefits. Taxpayers should see the instructions to Forms 8863 and 8917 and Publication 970 for details on properly figuring allowable tax benefits.
Many of those eligible for the American opportunity tax credit qualify for the maximum annual credit of $2,500 per student. Here are some key features of the credit:
Eligible parents and students can get the benefit of these provisions during the year by having less tax taken out of their paychecks. They can do this by filling out a new Form W-4, claiming additional withholding allowances, and giving it to their employer.
There are a variety of other education-related tax benefits that can help many taxpayers. They include:
In general, the American opportunity tax credit, lifetime learning credit and tuition and fees deduction are available to taxpayers who pay qualifying expenses for an eligible student. Eligible students include the primary taxpayer, the taxpayer’s spouse or a dependent of the taxpayer.
Though a taxpayer often qualifies for more than one of these benefits, he or she can only claim one of them for a particular student in a particular year. The benefits are available to all taxpayers – both those who itemize their deductions on Schedule A and those who claim a standard deduction. The credits are claimed on Form 8863 and the tuition and fees deduction is claimed on Form 8917.
The American Taxpayer Relief Act, enacted Jan. 2, 2013, extended the American opportunity tax credit for another five years until the end of 2017. The new law also retroactively extended the tuition and fees deduction, which had expired at the end of 2011, through 2013. The lifetime learning credit did not need to be extended because it was already a permanent part of the tax code.
For those eligible, including most undergraduate students, the American opportunity tax credit will yield the greatest tax savings. Alternatively, the lifetime learning credit should be considered by part-time students and those attending graduate school. For others, especially those who don’t qualify for either credit, the tuition and fees deduction may be the right choice.
All three benefits are available for students enrolled in an eligible college, university or vocational school, including both nonprofit and for-profit institutions. None of them can be claimed by a nonresident alien or married person filing a separate return. In most cases, dependents cannot claim these education benefits.
Normally, a student will receive a Form 1098-T from their institution by the end of January of the following year. This form will show information about tuition paid or billed along with other information. However, amounts shown on this form may differ from amounts taxpayers are eligible to claim for these tax benefits. Taxpayers should see the instructions to Forms 8863 and 8917 and Publication 970 for details on properly figuring allowable tax benefits.
Many of those eligible for the American opportunity tax credit qualify for the maximum annual credit of $2,500 per student. Here are some key features of the credit:
- The credit targets the first four years of post-secondary education, and a student must be enrolled at least half time. This means that expenses paid for a student who, as of the beginning of the tax year, has already completed the first four years of college do not qualify. Any student with a felony drug conviction also does not qualify.
- Tuition, required enrollment fees, books and other required course materials generally qualify. Other expenses, such as room and board, do not.
- The credit equals 100 percent of the first $2,000 spent and 25 percent of the next $2,000. That means the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualified expenses for an eligible student.
- The full credit can only be claimed by taxpayers whose modified adjusted gross income (MAGI) is $80,000 or less. For married couples filing a joint return, the limit is $160,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $180,000 or more and singles, heads of household and some widows and widowers whose MAGI is $90,000 or more.
- Forty percent of the American opportunity tax credit is refundable. This means that even people who owe no tax can get an annual payment of up to $1,000 for each eligible student. Other education-related credits and deductions do not provide a benefit to people who owe no tax.
- Tuition and fees required for enrollment or attendance qualify as do other fees required for the course. Additional expenses do not.
- The credit equals 20 percent of the amount spent on eligible expenses across all students on the return. That means the full $2,000 credit is only available to a taxpayer who pays $10,000 or more in qualifying tuition and fees and has sufficient tax liability.
- Income limits are lower than under the American opportunity tax credit. For 2012, the full credit can be claimed by taxpayers whose MAGI is $52,000 or less. For married couples filing a joint return, the limit is $104,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $124,000 or more and singles, heads of household and some widows and widowers whose MAGI is $62,000 or more.
Eligible parents and students can get the benefit of these provisions during the year by having less tax taken out of their paychecks. They can do this by filling out a new Form W-4, claiming additional withholding allowances, and giving it to their employer.
There are a variety of other education-related tax benefits that can help many taxpayers. They include:
- Scholarship and fellowship grants—generally tax-free if used to pay for tuition, required enrollment fees, books and other course materials, but taxable if used for room, board, research, travel or other expenses.
- Student loan interest deduction of up to $2,500 per year.
- Savings bonds used to pay for college—though income limits apply, interest is usually tax-free if bonds were purchased after 1989 by a taxpayer who, at time of purchase, was at least 24 years old.
- Qualified tuition programs, also called 529 plans, used by many families to prepay or save for a child’s college education.
Back-to-School Tips for Students and Parents Paying College Expenses
Whether you’re a recent high school graduate going to college for the first time or a returning student, it will soon be time to head to campus, and payment deadlines for tuition and other fees are not far behind.
The IRS offers some tips about education tax benefits that can help offset some college costs for students and parents. Typically, these benefits apply to you, your spouse or a dependent for whom you claim an exemption on your tax return.
The IRS offers some tips about education tax benefits that can help offset some college costs for students and parents. Typically, these benefits apply to you, your spouse or a dependent for whom you claim an exemption on your tax return.
- American Opportunity Credit. This credit, originally created under the American Recovery and Reinvestment Act, is still available for 2012. The credit can be up to $2,500 per eligible student and is available for the first four years of post secondary education at an eligible institution. Forty percent of this credit is refundable, which means that you may be able to receive up to $1,000, even if you don’t owe any taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment.
- Lifetime Learning Credit. In 2012, you may be able to claim a Lifetime Learning Credit of up to $2,000 for qualified education expenses paid for a student enrolled in eligible educational institutions. There is no limit on the number of years you can claim the Lifetime Learning Credit for an eligible student.
- Student loan interest deduction. Generally, personal interest you pay, other than certain mortgage interest, is not deductible. However, you may be able to deduct interest paid on a qualified student loan during the year. It can reduce the amount of your income subject to tax by up to $2,500, even if you don’t itemize deductions.
Automated IRS System Helps College-Bound Students with Financial Aid Application Process
College-bound students and their parents sometimes face last minute requests to complete or provide additional information for financial aid applications.
The Internal Revenue wants to help by minimizing time spent on the completion of the Department of Education’s Free Application for Federal Student Aid (FAFSA). By using the IRS Data Retrieval Tool, applicants can automatically transfer required tax data from their federal tax returns directly to their FAFSA form.
This IRS tool is a free, easy and secure way to access and transfer tax return information onto the FAFSA form. Using the tool saves time, improves accuracy and may reduce the likelihood of the school’s financial aid office requesting that you verify the information.
Here are some tips on using the IRS DRT (Data Retrieval Tool):
o possess a valid Social Security Number,
o have a Federal Student Aid PIN (individuals who don’t have a PIN will be given the option to apply for one through the FAFSA application process), and
o have not changed marital status since Dec. 31, 2011.
o no federal tax return was filed for 2011,
o the federal tax filing status on the 2011 return is married filing separately or
o a Puerto Rican or other foreign tax return has been filed.
Applicants who cannot use the IRS DRT to meet college requests for verification, may need to obtain an official transcript from the IRS. Transcripts are not available until the IRS has processed the related tax return. To order tax return or tax account transcripts, visit IRS.gov and select “Order a Transcript."
In addition, the IRS offers money-saving information for college students and their parents about tax credits and deductions for qualifying tuition, materials and fees.
The Internal Revenue wants to help by minimizing time spent on the completion of the Department of Education’s Free Application for Federal Student Aid (FAFSA). By using the IRS Data Retrieval Tool, applicants can automatically transfer required tax data from their federal tax returns directly to their FAFSA form.
This IRS tool is a free, easy and secure way to access and transfer tax return information onto the FAFSA form. Using the tool saves time, improves accuracy and may reduce the likelihood of the school’s financial aid office requesting that you verify the information.
Here are some tips on using the IRS DRT (Data Retrieval Tool):
- Eligibility Criteria To use the IRS DRT to complete their 2012 -2013 FAFSA form, taxpayers must:
o possess a valid Social Security Number,
o have a Federal Student Aid PIN (individuals who don’t have a PIN will be given the option to apply for one through the FAFSA application process), and
o have not changed marital status since Dec. 31, 2011.
- Exceptions If any of the following conditions apply to the student or parents, the IRS Data Retrieval Tool cannot be used for the 2012 FAFSA application:
o no federal tax return was filed for 2011,
o the federal tax filing status on the 2011 return is married filing separately or
o a Puerto Rican or other foreign tax return has been filed.
Applicants who cannot use the IRS DRT to meet college requests for verification, may need to obtain an official transcript from the IRS. Transcripts are not available until the IRS has processed the related tax return. To order tax return or tax account transcripts, visit IRS.gov and select “Order a Transcript."
In addition, the IRS offers money-saving information for college students and their parents about tax credits and deductions for qualifying tuition, materials and fees.
Last-Minute Reminder to Parents and Students; Don't Overlook College Tax Benefits
WASHINGTON — The Internal Revenue Service today reminded parents and students rushing to meet this year’s April 17 deadline to be sure and check out several college-related tax benefits before filing their 2011 returns.
Two tax credits and a tax deduction are available to taxpayers who paid tuition and other expenses for an eligible student during 2011. Because an eligible student can be the taxpayer, spouse or dependent, these benefits can, for example, help workers taking continuing education courses and people returning to school, as well as parents paying for their children’s college education.
Given the number of different higher education credits and deductions, the IRS reminds taxpayers to carefully review eligibility requirements so they don’t overlook these important college benefits. Tax benefits include the following:
Though a taxpayer often qualifies for more than one of these benefits, he or she can only claim one of them for a particular student in 2011. Income limits and other special rules apply to each of these benefits. The general comparison table in Publication 970 can be a useful guide to taxpayers in determining eligibility for each of these benefits.
Often, tax credits are more valuable, because they reduce the amount of tax owed, whereas deductions reduce the income on which tax is figured. Tax software can often help parents and students determine which benefit yields the greatest tax savings.
Besides these tax benefits, parents, students and former students who made student loan payments during 2011 can deduct up to $2,500 of student loan interest. Normally, borrowers receive from their financial institution Form 1098-E showing student loan interest paid for the year. This deduction is claimed on Form 1040 Line 33 or Form 1040A Line 18. Income limits and other special rules apply. For example, the student must have been enrolled at least half time in a degree or certificate program. A worksheet in the tax form instructions can help taxpayers figure the deduction correctly.
The student loan interest deduction, the tuition and fees deduction and both tax credits can be claimed by eligible taxpayers, regardless of whether they itemize deductions on Schedule A. These benefits are available to both Form 1040 and 1040A filers. Details on these and other education-related deductions and credits can be found in the Tax Benefits for Education Information Center on IRS.gov.
Two tax credits and a tax deduction are available to taxpayers who paid tuition and other expenses for an eligible student during 2011. Because an eligible student can be the taxpayer, spouse or dependent, these benefits can, for example, help workers taking continuing education courses and people returning to school, as well as parents paying for their children’s college education.
Given the number of different higher education credits and deductions, the IRS reminds taxpayers to carefully review eligibility requirements so they don’t overlook these important college benefits. Tax benefits include the following:
- The American Opportunity Tax Credit helps pay for the first four years of post-secondary education. Tuition, required enrollment fees, books and other required course materials generally qualify, and eligible students must be enrolled at least half time. Qualifying expenses of $4,000 or more in 2011 can earn a taxpayer the maximum credit of $2,500 per student per year. Even taxpayers who owe no tax can get a payment of the credit of up to $1,000 for each eligible student. The credit is claimed on Form 8863. But the IRS warns taxpayers to avoid an often-costly tax scam, currently being promoted widely to senior citizens, low-income families and church members falsely claiming that refunds based on the credit are available, even if they’re not currently enrolled in college and even if they went to school decades ago. In addition, some international students, normally considered nonresident aliens for tax purposes, have been improperly advised that they qualify for the credit.
- The Lifetime Learning Credit, limited to $2,000 per taxpayer per year, can be claimed based on tuition and required enrollment fees paid for any level of post-secondary education. Because of differences between the two credits and the fact that the American Opportunity Tax Credit usually yields greater tax savings at the undergraduate level, the Lifetime Learning Credit may be particularly helpful to graduate students, students taking only one course and those who are not pursuing a degree. The Lifetime Learning Credit is also claimed on Form 8863.
- The tuition and fees deduction is available for both full-time and part-time students at all levels of post-secondary education. The deduction of up to $4,000 is claimed on Form 8917.
Though a taxpayer often qualifies for more than one of these benefits, he or she can only claim one of them for a particular student in 2011. Income limits and other special rules apply to each of these benefits. The general comparison table in Publication 970 can be a useful guide to taxpayers in determining eligibility for each of these benefits.
Often, tax credits are more valuable, because they reduce the amount of tax owed, whereas deductions reduce the income on which tax is figured. Tax software can often help parents and students determine which benefit yields the greatest tax savings.
Besides these tax benefits, parents, students and former students who made student loan payments during 2011 can deduct up to $2,500 of student loan interest. Normally, borrowers receive from their financial institution Form 1098-E showing student loan interest paid for the year. This deduction is claimed on Form 1040 Line 33 or Form 1040A Line 18. Income limits and other special rules apply. For example, the student must have been enrolled at least half time in a degree or certificate program. A worksheet in the tax form instructions can help taxpayers figure the deduction correctly.
The student loan interest deduction, the tuition and fees deduction and both tax credits can be claimed by eligible taxpayers, regardless of whether they itemize deductions on Schedule A. These benefits are available to both Form 1040 and 1040A filers. Details on these and other education-related deductions and credits can be found in the Tax Benefits for Education Information Center on IRS.gov.
Education Tax Credits Help Pay Higher Education Costs
Two federal tax credits may help you offset the costs of higher education for yourself or your dependents. These are the American Opportunity Credit and the Lifetime Learning Credit.
To qualify for either credit, you must pay postsecondary tuition and fees for yourself, your spouse or your dependent. The credit may be claimed by either the parent or the student, but not both. If the student was claimed as a dependent, the student cannot file for the credit.
For each student, you may claim only one of the credits in a single tax year. You cannot claim the American Opportunity Credit to pay for part of your daughter’s tuition charges and then claim the Lifetime Learning Credit for $2,000 more of her school costs.
However, if you pay college expenses for two or more students in the same year, you can choose to take credits on a per-student, per-year basis. You can claim the American Opportunity Credit for your sophomore daughter and the Lifetime Learning Credit for your spouse’s graduate school tuition.
Here are some key facts the IRS wants you to know about these valuable education credits:
1. The American Opportunity Credit
To qualify for either credit, you must pay postsecondary tuition and fees for yourself, your spouse or your dependent. The credit may be claimed by either the parent or the student, but not both. If the student was claimed as a dependent, the student cannot file for the credit.
For each student, you may claim only one of the credits in a single tax year. You cannot claim the American Opportunity Credit to pay for part of your daughter’s tuition charges and then claim the Lifetime Learning Credit for $2,000 more of her school costs.
However, if you pay college expenses for two or more students in the same year, you can choose to take credits on a per-student, per-year basis. You can claim the American Opportunity Credit for your sophomore daughter and the Lifetime Learning Credit for your spouse’s graduate school tuition.
Here are some key facts the IRS wants you to know about these valuable education credits:
1. The American Opportunity Credit
- The credit can be up to $2,500 per eligible student.
- It is available for the first four years of postsecondary education.
- Forty percent of the credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes.
- The student must be pursuing an undergraduate degree or other recognized educational credential.
- The student must be enrolled at least half time for at least one academic period.
- Qualified expenses include tuition and fees, coursed related books supplies and equipment.
- The full credit is generally available to eligible taxpayers whose modified adjusted gross income is less than $80,000 or $160,000 for married couples filing a joint return.
- The credit can be up to $2,000 per eligible student.
- It is available for all years of postsecondary education and for courses to acquire or improve job skills.
- The maximum credited is limited to the amount of tax you must pay on your return.
- The student does not need to be pursuing a degree or other recognized education credential.
- Qualified expenses include tuition and fees, course related books, supplies and equipment.
- The full credit is generally available to eligible taxpayers whose modified adjusted gross income is less than $60,000 or $120,000 for married couples filing a joint return.
Educational Expenses
You may be able to deduct work–related educational expenses paid during the year as an itemized deduction on Form 1040, Schedule A. To be deductible, your expenses must be for education that (1) maintains or improves your job performance, or (2) is required by your employer or by law to keep your salary, status or job. Also, the education cannot part of a program that will qualify you for a new trade or business.
Although the education must relate to your present work, educational expenses incurred during temporary absence from your job may be deductible. However, after your temporary absence, you must return to the same kind of work. Usually, absence from work for one year or less is considered temporary.
If you are an employee, you generally must complete Form 2106 (PDF) or Form 2106-EZ (PDF). Educational expenses are deducted as miscellaneous itemized deductions on Form 1040 Schedule A; they are subject to the 2% of adjusted gross income limit. For more information on the 2% limit, refer to Publication 529 and/or Form 1040, Schedule A Instructions.
Self–employed individuals include educational expenses on Form 1040, Schedule C (PDF), Form 1040, Schedule C-EZ (PDF) or Form 1040, Schedule F (PDF).
Your employer may report the educational assistance payments on your Form W-2 (PDF) in the appropriate box under "other". Taxable reimbursements will be reported by your employer as income to you in the appropriate box of Form W–2.
For more information on educational expenses or Education Tax Credits, refer to Chapters 11 & 12 of Publication 970, Tax Benefits for Education.
Although the education must relate to your present work, educational expenses incurred during temporary absence from your job may be deductible. However, after your temporary absence, you must return to the same kind of work. Usually, absence from work for one year or less is considered temporary.
If you are an employee, you generally must complete Form 2106 (PDF) or Form 2106-EZ (PDF). Educational expenses are deducted as miscellaneous itemized deductions on Form 1040 Schedule A; they are subject to the 2% of adjusted gross income limit. For more information on the 2% limit, refer to Publication 529 and/or Form 1040, Schedule A Instructions.
Self–employed individuals include educational expenses on Form 1040, Schedule C (PDF), Form 1040, Schedule C-EZ (PDF) or Form 1040, Schedule F (PDF).
Your employer may report the educational assistance payments on your Form W-2 (PDF) in the appropriate box under "other". Taxable reimbursements will be reported by your employer as income to you in the appropriate box of Form W–2.
For more information on educational expenses or Education Tax Credits, refer to Chapters 11 & 12 of Publication 970, Tax Benefits for Education.
Qualified Tuition Programs (QTPs)
A Qualified Tuition Program (QTP) also called "529 plan", formerly called a Qualified State Tuition Program (QSTP), is a program established and maintained by a state, or agency or instrumentality of a state, to allow either prepaying, or contributing to an account established for paying a student's qualified higher education expenses at an eligible educational institution. Eligible educational institutions can establish and maintain QTP(s) to allow prepaying a student's qualified higher education expenses.
An eligible educational institution is generally any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education.
Contributions to QTP — Contributions to a QTP on behalf of any beneficiary cannot be more than the amount necessary to provide for the qualified higher education expenses of the beneficiary. Contributions made to a QTP are not deductible on your Federal tax return.
For additional information, refer to Chapter 8 of Publication 970, Tax Benefits for Education.
An eligible educational institution is generally any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education.
Contributions to QTP — Contributions to a QTP on behalf of any beneficiary cannot be more than the amount necessary to provide for the qualified higher education expenses of the beneficiary. Contributions made to a QTP are not deductible on your Federal tax return.
For additional information, refer to Chapter 8 of Publication 970, Tax Benefits for Education.
Coverdell Education Savings Accounts
You may be able to contribute to a Coverdell Education Savings Account (ESA) to finance a beneficiary's qualified education expenses if your modified adjusted gross income is below the established amount. There is no limit to the number of accounts that can be established for a beneficiary; however the total contribution to all accounts on behalf of a beneficiary in any year cannot exceed $2,000.00. The contribution is NOT deductible. The designated beneficiary must be under the age of 18 years of age at the time the account is established, except for a special needs beneficiary.
A Coverdell ESA is a trust or custodial account set up in the United States solely for the purpose of paying qualified education expenses for the designated beneficiary of the account. In general, the designated beneficiary of a Coverdell ESA can receive tax free distributions to pay qualified education expenses. The distributions are tax free to the extent the amount of the distributions do not exceed the beneficiary's qualified education expenses. If a distribution does exceed the beneficiary's qualified education expenses, a portion of the distribution is taxable. For information on how to determine the part of any distribution that is taxable earnings, refer to Publication 970, Tax Benefits for Education.
A Coverdell ESA is a trust or custodial account set up in the United States solely for the purpose of paying qualified education expenses for the designated beneficiary of the account. In general, the designated beneficiary of a Coverdell ESA can receive tax free distributions to pay qualified education expenses. The distributions are tax free to the extent the amount of the distributions do not exceed the beneficiary's qualified education expenses. If a distribution does exceed the beneficiary's qualified education expenses, a portion of the distribution is taxable. For information on how to determine the part of any distribution that is taxable earnings, refer to Publication 970, Tax Benefits for Education.
Scholarship and Fellowship Grants
If you receive a scholarship or fellowship grant, all or part of the amounts you receive may be tax–free.
Qualified scholarship and fellowship grants are treated as tax–free amounts if all the following conditions are met:
However, you do not need to include in gross income any amounts you receive for services that are required by the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance Program.
If any part of your scholarship or fellowship grant is taxable, you may have to make estimated tax payments. For more information refer to Publication 970 , Tax Benefits for Education
Qualified scholarship and fellowship grants are treated as tax–free amounts if all the following conditions are met:
- You are a candidate for a degree at an educational institution that maintains a regular faculty and curriculum and normally has a regular enrolled body of students in attendance at the place where it carries on its educational activities; and
- Amounts you receive as a scholarship or fellowship grant are used for tuition and fees required for enrollment or attendance at the educational institution, or for fees, books, supplies, and equipment required for courses of instruction.
However, you do not need to include in gross income any amounts you receive for services that are required by the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance Program.
If any part of your scholarship or fellowship grant is taxable, you may have to make estimated tax payments. For more information refer to Publication 970 , Tax Benefits for Education
Student Loan Interest Deduction
You may be able to deduct interest you pay on a qualified student loan. And, if your student loan is canceled, you may not have to include any amount in income.
The deduction is claimed as an adjustment to income so you do not need to itemize your deductions on Schedule A Form 1040.
You can claim the deduction if all of the following apply:
If you file a Form 2555, Form 2555EZ or Form 4563, use Publication 970 instead of the worksheet in the Form 1040 Instructions.
The deduction will start to phase out when the modified AGI exceeds certain amounts. To determine when the deduction is phased out, please refer to Publication 970, Tax Benefits for Education. If you paid $600 or more of interest on a qualified student loan during the year, you will receive a Form 1098-E (PDF), Student Loan Interest Statement, from the entity to which you paid the student loan interest.
The deduction is claimed as an adjustment to income so you do not need to itemize your deductions on Schedule A Form 1040.
You can claim the deduction if all of the following apply:
- You paid interest on a qualified student loan in tax year 2009
- Your filing status is not married filing separately
- Your modified adjusted gross income is less than $70,000 ($145,000 if filing jointly)
- You and your spouse, if filing jointly, cannot be claimed as dependents on someone else's return
If you file a Form 2555, Form 2555EZ or Form 4563, use Publication 970 instead of the worksheet in the Form 1040 Instructions.
The deduction will start to phase out when the modified AGI exceeds certain amounts. To determine when the deduction is phased out, please refer to Publication 970, Tax Benefits for Education. If you paid $600 or more of interest on a qualified student loan during the year, you will receive a Form 1098-E (PDF), Student Loan Interest Statement, from the entity to which you paid the student loan interest.
Technology Expenses Make the Grade for Qualified Tuition Programs
Taxpayers who purchase computer technology for high education purposes may be eligible for a special tax break. The American Recovery and Reinvestment Act of 2009 added computer equipment and technology to the list of college expenses that can be paid for by a qualified tuition program, commonly refereed to as a 529 plan.
A qualified, nontaxable distribution from a 529 plan during 2009 or 2010 now includes the cost of the purchase of any computer technology, equipment or Internet access and related services. To qualify the beneficiary must use the technology, equipment or services while enrolled at an eligible educational institution.
Here are some things the IRS wants you to know about 529 plans.
A qualified, nontaxable distribution from a 529 plan during 2009 or 2010 now includes the cost of the purchase of any computer technology, equipment or Internet access and related services. To qualify the beneficiary must use the technology, equipment or services while enrolled at an eligible educational institution.
Here are some things the IRS wants you to know about 529 plans.
- A 529 plan is an educational savings plan designed to provide tax-free earnings for the benefit of a student. Withdrawals must be used for qualified higher education expenses at an eligible educational institution.
- Qualified higher education expenses include tuition, reasonable costs of room and board, mandatory fees, computer technology, supplies and books.
- An eligible educational institution includes any college, university, vocational school or other post-secondary educational institution eligible to participate in a student aid program administered by the Department of Education.
- Contributions to a 529 plan cannot be more than the amount necessary to provide for a student's qualified education expenses.
Top Ten Facts About the Tuition and Fees Deduction
The Tuition and Fees deduction of up to $4,000 is available to help parents and students pay for post-secondary education. Below are ten important facts about this deduction every student and parent should know.
1. You do not have to itemize to take the Tuition and Fees deduction. You claim a tuition and fees deduction by completing Form 8917 and submitting it with your Form 1040 or Form 1040A.
2. You may be able to claim qualified tuition and fees expenses as either an adjustment to income, a Hope or Lifetime Learning credit, or – if applicable – as a business expense.
3. You cannot take the tuition and fees deduction on your income tax return if your filing status is married filing separately.
4. You cannot take the deduction if you are claimed, or can be claimed, as a dependent on someone else's return.
5. The deduction is reduced or eliminated if your modified adjusted gross income exceeds certain limits, based on your filing status.
6. You cannot claim the tuition and fees deduction if you or anyone else claims the Hope or Lifetime Learning credit for the same student in the same year.
7. If the educational expenses are also allowable as a business expense, the tuition and fees deduction may be claimed in conjunction with a business expense deduction, but the same expenses cannot be deducted twice.
8. You cannot claim a deduction or credit based on expenses paid with tax-free scholarship, fellowship, grant, or education savings account funds such as a Coverdell education savings account, tax-free savings bond interest or employer-provided education assistance.
9. The same rule applies to expenses you pay with a tax-exempt distribution from a qualified tuition plan, except that you can deduct qualified expenses you pay only with that part of the distribution that is a return of your contribution to the plan.
10. IRS Publication 970, Tax Benefits for Education, can help eligible parents and students understand the special rules that apply and decide which tax break to claim.
1. You do not have to itemize to take the Tuition and Fees deduction. You claim a tuition and fees deduction by completing Form 8917 and submitting it with your Form 1040 or Form 1040A.
2. You may be able to claim qualified tuition and fees expenses as either an adjustment to income, a Hope or Lifetime Learning credit, or – if applicable – as a business expense.
3. You cannot take the tuition and fees deduction on your income tax return if your filing status is married filing separately.
4. You cannot take the deduction if you are claimed, or can be claimed, as a dependent on someone else's return.
5. The deduction is reduced or eliminated if your modified adjusted gross income exceeds certain limits, based on your filing status.
6. You cannot claim the tuition and fees deduction if you or anyone else claims the Hope or Lifetime Learning credit for the same student in the same year.
7. If the educational expenses are also allowable as a business expense, the tuition and fees deduction may be claimed in conjunction with a business expense deduction, but the same expenses cannot be deducted twice.
8. You cannot claim a deduction or credit based on expenses paid with tax-free scholarship, fellowship, grant, or education savings account funds such as a Coverdell education savings account, tax-free savings bond interest or employer-provided education assistance.
9. The same rule applies to expenses you pay with a tax-exempt distribution from a qualified tuition plan, except that you can deduct qualified expenses you pay only with that part of the distribution that is a return of your contribution to the plan.
10. IRS Publication 970, Tax Benefits for Education, can help eligible parents and students understand the special rules that apply and decide which tax break to claim.