Monday we began our discussion on above the line deductions with Health Savings Accounts and yesterday we discussed Moving Expenses. Today we will get into Tuition and Fees Deduction.
Let’s face it; college is expensive. It can cost upwards of $8,000.00 a semester. In order to make this cost a bit easier to swallow, the Federal Government provides some assistance in the form of tax deductions and tax credits. We have discussed both the American Opportunity Credit, and the Lifetime Learning Credit last month. Today we are going to discuss the Tuition and Fees Deduction. If you are unable to take the tax credits that are associated with college tuition, there is some good news; you may be able to deduct the expenses as a tax deduction instead.
Generally, you can claim this deduction if you meet the following three requirements:
1. You pay qualified higher education expenses
2. You pay the education expenses for an eligible student
3. The eligible student is yourself, your spouse, or a dependent that you claim as an exemption on your tax return.
You cannot claim the deduction is your filing status is married filing separately or if you may be claimed as a dependent on someone else’s tax return.
You may be eligible to take up to $4,000.00 of qualified education expenses. Qualified education expenses include:
· Tuition and certain fees related to expenses required for enrollment of attendance at an eligible education institution.
· Student activity fees and expenses for course related books, supplies, and equipment only if the fees are paid to the institution as a condition of enrollment.
The following expenses cannot be deducted:
· Room and board
· Insurance
· Medical expenses
· Transportation
· Similar personal, living, or family expenses
· Courses of instruction that involve sports, games, or hobbies.
There are reductions in the amount of the expense that you can claim. The amount of the deduction is determined by your modified adjusted gross income (MAGI). If you MAGI is less than $65,000.00 ($130,000.00 married filing joint) then you will receive the maximum $4,000.00 deduction. If your MAGI is between $65,000.00 and $80,000.00 ($130,000.00 and $160,000.00 married filing joint) then the maximum deduction that you can take is $2,000.00. If your MAGI is more than $80,000.00 ($160,000.00 married filing joint) then you cannot take the deduction.
You can only claim either the tuition deduction or one of the tuition credits, you cannot deduct both.
For more information visit www.smalleynco.com
If you have any questions you can email Craig W. Smalley E.A.
Author of the books: It Starts With an Idea – Tax Tips for Small Businesses available on Nook and Kindle, The Ultimate Real Estate Investor Tax Guide, available on Nook and Kindle, The Complete Guide to the New Tax Law – American Taxpayer Relief Act of 2012 available on Nook and Kindle, Everything You Wanted to Know about the IRS – Audits, Appeals and Collections available on Nook and Kindle, Tax Avoidance is Legal! The Complete Guide to Individual Income Tax available on Nook and Kindle, The Complete Guide to the Affordable Care Act’s Tax Provisions available on Nook and Kindle, The Complete Guide to Retirement Plans for Small Businesses available on Nook and Kindle, and The Complete Guide to Estate, Gift and Trust Taxation, available on Nook and Kindle
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