Tuition and Fees Deduction
By: Emily Laycock
The Henssler Financial Group Position Paper
Are you or one of your family members in college? You may be eligible for a Tuition and Fees Deduction on your federal tax return to help ease some of the cost of tuition.
What is the Tuition and Fees Tax Deduction?
The Tuition and Fees Tax Deduction allows taxpayers to claim a deduction on their tax return for the qualified tuition paid for themselves, their spouse or one of their dependents who attend a postsecondary school. To claim the deduction your filing status cannot be married filing separately. The student must be pursuing a college degree, graduate degree or vocational training.
The Tuition and Fees Deduction may be claimed along with The Lifetime Learning Credit or The Hope Scholarship Credit, as long as the credit and deduction are being taken for two different students within your family. The Tuition and Fees Deduction offers an allowable deduction of up to $4,000 per tax return per year for an unlimited number of years.
- Personal living and family expenses, including room and board, insurance, medical and transportation are not deductible expenses.
- You may not claim this deduction if the tuition and fees were paid with tax-free scholarships.
The Tuition and Fees Deduction can be claimed by the student if the student is not claimed as a dependent on anyone else's tax return. If the student is a dependent, the individual(s) who is claiming the student as a dependent can take the deduction if available.
What is a deduction?
Tax deductions are adjustments to your income, which reduce your taxable income causing you to pay less tax. As a result, you can take advantage of this deduction even if you do not itemize your deductions on Schedule A. For example, if your taxable income for you and your spouse is $100,000, and you pay $3,000 in tuition for one of your dependents, your taxable income will be lowered to $97,000.
Who Qualifies?
To be eligible for The Tuition and Fees Deduction, you must be an individual who:
- Is not claiming the Hope Scholarship Credit or The Lifetime Learning Credit. Of course, if you do have more than one student in a family, one may qualify for the Lifetime Learning Credit or The Hope Scholarship Credit, while the other qualifies for The Tuition and Fees Deduction. No student can qualify for more than one benefit at a time.
- Is registered at least half-time at a postsecondary school and is working toward a degree or certificate.
When can I claim The Tuition and Fees Deduction?
The Tuition and Fees Deduction includes all qualified educational expenses paid during the current year. For example, if you pay for tuition in December 2007, but the semester does not begin until January 2008, you will be allowed to include this amount on your 2007 tax return.
To help you keep track of what you have paid during the year, schools must send a Form 1098-T to each taxpayer and to the IRS by January 31 telling you the amount of tuition and fees you have paid to their institution during the previous year.
Phase Out
Like many other tax credits and deductions, The Tuition and Fees Deduction also has some restrictions based on your income. Refer to the chart below to see the potential deductions allowed for your filing status and income level.
Filing Status |
Modified Adjusted |
Maximum |
Single, head of household, or a qualifying widow |
Not more than $65,000 |
$4,000 |
More than $65,000, but not more than $80,000 |
$2,000 |
|
More than $80,000 |
$0 |
|
Married filing joint |
Not more than $130,000 |
$4,000 |
More than $130,000, but not more than $160,000 |
$2,000 |
|
More than $160,000 |
$0 |
*Modified Adjusted Gross Income is your taxable income before any deductions have been considered.
If you would like additional information regarding this issue or any other tax related issues, please contact The Henssler Financial Group Tax & Accounting Division at 770-428-4025.