The Internal Revenue Service permits you to take a tax deduction for tuition costs, but only under certain circumstances. A deduction reduces your tax bill or increases your refund, and you claim deductions when you file your annual tax return. Only tuition paid to an eligible school -- a college, university, vocational school or post-high-school educational institution -- is deductible, and only if the school is allowed to offer student aid from the U.S. Department of Education. Some foreign schools also qualify.
The deduction is available for an eligible student, who might be you or your dependent. A dependent is someone for whom you pay the majority of support and can include your spouse and children. The student must be enrolled in an eligible school during the tax year. You can't take the deduction if you are married filing separately. You can receive the deduction only if you claimed an exemption for the student on your tax return. An exemption is a fixed amount you can deduct for yourself and each of your dependents.
Limits on the Deduction
To receive the deduction, your annual gross income can't exceed $80,000, or $160,000 if you file a join return with your spouse. The maximum you can deduct for tuition expenses in any one year is $2,000 or $4,000, depending on your income. You must be a U.S. citizen or resident alien to qualify for the deduction, which includes the costs of tuition, fees and expenses for course-related materials and equipment at an eligible school. You can't take the tuition deduction if it results in a "double benefit," which would occur if you also deducted the tuition as a business expense or if you received an education tax credit, such as an American Opportunity Credit. You subtract tax credits directly from your tax bill rather than from your taxable income.
Adjustment to Education Expenses
You must reduce your tuition deduction by the amount of tax-free educational assistance the student receives. Tax-free assistance can come from scholarships, fellowships, grants, veterans' educational assistance, employer programs, tax-free interest on U.S. Savings Bonds or money from a tax-free education savings account or tuition program. You can't deduct tuition expenses that have been refunded to you. The costs of education-related room and board, insurance, student health fees, transportation and other personal or living expenses are not deductible as educational expenses.
Claiming the Deduction
The student should receive IRS Form 1098-T, Tuition Statement, from the eligible school; it reports qualified education expenses for the tax year. You can only deduct expenses you actually paid. To claim the deduction, fill out IRS Form 8917, Tuition and Fees Deduction, to calculate the amount of your deduction, and then copy the deductible amount onto your main tax form, IRS Form 1040 or Form 1040A. Attach Form 8917 to your main tax form when you file your return.
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