There's a bit of uncertainty surrounding the tax deduction for college tuition and fees as we head toward tax day 2021. In 2017, the deduction technically expired. However, a new extension means that college tax deductions have been extended up through Dec. 31, 2020. That means that it is possible to claim a tax deduction for 2020 when filing your taxes in 2021.
College Tax Deduction Amounts
Eligible taxpayers may deduct up to $4,000 in college costs for 2020. This applies to college costs paid for you, a spouse or dependent children. Here's a look at what the IRS considers qualifying expenses:
- College fees
Read More: How to Calculate College Tuition on a Tax Return
Generally, anything that can be proven as being "required for enrollment or attendance" will qualify as a deductible expense. If you're planning to take this deduction, it's important to keep records of all expenses related to college. It's also important to know that any tax-free educational assistance provided to a student during a calendar year must be subtracted from the eligible expenses you'll be claiming. This includes things like scholarships or employer-sponsored tuition coverage.
Maximum Deduction for College Expenses
The maximum deduction for taxpayers with a modified adjusted gross income of $65,000 is $4,000. For married filing jointly, the income threshold is $130,000. For taxpayers with gross incomes between $65,001 and $80,000, the maximum deduction is $2,000. The numbers move to $130,001 and $160,000 for that $2,000 maximum for married filing jointly.
Read More: Educational Grants for Divorced Women
Claiming the College Tuition Deduction
The IRS provides something called the Form 8917 to allow you to claim qualified tuition and fees paid in 2018, 2019 or 2020. This form is intended to be attached to Form 1040. If you'd like to claim a college tax deduction retroactively because you believed that this tax credit had expired without being renewed, you can use a Form 1040X.
Implications for 529 College Savings Plans
Generally, yes. The tax deduction is still in play as long as the expenses you plan to deduct were not paid using distributions from your 529 plan. You will not be eligible to claim any college tax deduction if you've used the American Opportunity Tax Credit or Lifetime Learning Tax Credit this year.
Read More: College Grants for Students Over 50 Years Old
Possibility of Extension to 2021
The answer to whether the college tax deduction gets extended is uncertain as of right now. However, the tax benefit has been extended consistently since expiring in 2017. That means that there's a good chance that college expenses will be deductible in 2021. The big thing to know for now is that you are eligible for tax deductions for college tuition based on what you spent in 2020.
- IRS: Form 8917
- IRS: Form 1040X
- Taxslayer: What Are the Requirements to Claim the Tuition and Fees Deduction?
- Saving for College: Tuition and Fees Deduction Extended Through 2020
- SEC.gov. "An Introduction to 529 Plans." Accessed Jan. 15, 2020.
- IRS.gov. "Tax Benefits for Education: Information Center." Accessed Jan. 15, 2020.
- IRS.gov. "American Opportunity Tax Credit: Questions and Answers." Accessed Jan. 15, 2020.
- College Financial Aid Advice. "College Tax Credit: American Opportunity Tax Credit." Accessed Jan. 15, 2020.
- IRS.gov. "Lifetime Learning Credit." Accessed Jan. 15, 2020.
- IRS.gov. "Compare Education Credits," Accessed Jan. 15, 2020.
- You cannot claim a credit or deduction if you are married and file your taxes separately.
Adam Luehrs is a writer during the day and a voracious reader at night. He focuses mostly on finance writing and has a passion for real estate, credit card deals, and investing.