If your child went through the college application process a few years ago, you might have been able to write off those application fees on your federal taxes. But if you have another child going through the college application process, you’re out of luck as far as deducting those fees. Congress didn’t renew the federal income school tax deduction for tuition and fees for 2018, although it was in place in 2017. That means your tax bill is likely higher in that regard, but you have plenty of company. An estimated 1.7 million middle-class families lost this tax break, for 2018, which included college registration fees tax relief. Along with college application fees, college entrance exam fees like the SAT and ACT are another nondeductible item. While you can’t deduct college application or entrance exam fees, you may still qualify for some educational tax credits.
Although college application fees are not tax deductible, there are deductions parents and students can take once the student is in college.
Amending a Return
Although many college-related expenses are no longer deductible, if you did not claim them for a student in your family for 2017, you can amend that return and still receive the deduction. The IRS allows you to amend your return for two years after you paid taxes due for a particular year or for three years after you actually filed the original return. The later date applies. Use Form 8917 to claim the deduction when amending your return.
Claiming Qualified Education Expenses Credits
The American Opportunity Tax Credit allows taxpayers to deduct expenses, in addition to tuition, related to books, supplies and equipment that the college doesn’t supply, but that is required for coursework. For example, the computer that the college requires your child to have may qualify for the AOTC. Eligible taxpayers may claim the AOTC for up to four years. The AOTC offers a tax credit worth up to $2,500 annually. This means the credit reduces the amount of tax you owe on a dollar-per-dollar basis. Even better, up to 40 percent of the AOTC is refundable, with a limit of $1,000. That means you can get the refund even if you don’t owe taxes.
When claiming the AOTC, you must include the college’s Employee Identification Number on your tax form. If you claim the AOTC when you’re ineligible, the IRS may ban you from claiming it again for up to 10 years. For 2017, the modified adjusted gross income eligibility limit for claiming the AOTC is $180,000 for married couples filing jointly and $90,000 for single filers. There are no changes to the AOTC for the 2018 tax season.
Deducting The Lifetime Learning Credit
The Lifetime Learning Credit permits taxpayers to claim up to 20 percent of out-of-pocket college expenses if the family member attends a college participating in the Department of Education’s student aid programs. The maximum amount of credit is $2,000. Unlike the AOTC, the LLC is claimable as long as a student attends college, and the credit is available for post-graduates as well as undergrads. The modified adjusted gross income limit for LLC eligibility as of 2017 is $132,000 for married couples filing jointly and $66,000 for single filers. There are no changes to the Lifetime Learning Credit for the 2018 tax season.
Filing Your Education Expenses Tax Deduction Paperwork
Use Form 8863 if claiming either the AOTC or LLC. You cannot claim both credits for the same student in the same year. Certain expenses do not qualify for either the AOTC or LLC. These include transportation, room and board, medical expenses, insurance, and fees not required for attendance or enrollment. There is no double dipping with the AOTC or LLC. You can’t include expenses claimed for any other type of educational credit or deduction or try claiming a credit for tuition that is provided tax-free, such as a Pell or other type of grant.
- TurboTax: Are College Entrance Exams Tax Deductible?
- IRS: 2017 Instructions for Form 8863
- IRS: Education Credits: Questions and Answers
- IRS: Form 8863
- IRS: Tuition and Fees Deduction at a Glance
- H&R Block: Changes to Education With Tax Reform
- Internal Revenue Service. "American Opportunity Tax Credit." Accessed Feb. 3, 2020.
- Internal Revenue Service. "Tax Reform Provisions that Affect Individuals." Accessed Feb. 3, 2020.
- United States Congress. "Actions Overview: H.R. 1, 115th Congress." Accessed Feb. 1, 2020.
- Internal Revenue Service. "Compare Education Credits and Tuition and Fees Deduction." Accessed Feb. 5, 2020.
- Internal Revenue Service. "The Lifetime Learning Credit (LLC)." Accessed Feb. 1, 2020.
- Internal Revenue Service. "Publication 970 (2019), Tax Benefits for Education." Accessed Feb. 5, 2020.
A graduate of New York University, Jane Meggitt's work has appeared in dozens of publications, including Sapling, Zack's, Financial Advisor, nj.com, LegalZoom and The Nest.