Tuition and Fees Deduction

Who is eligible for the tuition deduction?
You may be able to deduct qualified education expenses paid during the year for yourself, your spouse, or a dependent. The amount you can deduct depends on your modified adjusted gross income (MAGI). You are not eligible for the tuition deduction if another person can claim an exemption for you as a dependent. Also excluded are married persons filing separately.

What education expenses qualify?
Qualified expenses include tuition and fees but not books, personal, or living expenses, such as room and board. The costs of course-related books and supplies are not considered qualified education expenses unless these expenses must be paid to the institution as a condition of enrollment or attendance.

What if I use funds from a Coverdell Education Savings Account to pay for tuition and expenses?
When you pay your tuition with tax-advantaged education funds from a Coverdell Education Savings Account or a state tuition plan, or with the interest on U.S. savings bonds, these amounts must be subtracted from your qualified expenses to arrive at the deductible amount. The same rule applies to any nontaxable employer-provided education benefits you receive.

What about graduate school?
Graduate or undergraduate level college courses can be deducted and you don’t have to be a full-time student to qualify. However, the educational institution must be eligible to participate in the student aid programs administered by the Department of Education. Virtually all accredited public, nonprofit, and proprietary postsecondary institutions are eligible.

What if I have two children in college at the same time?
The tuition and fees deduction is $4,000 total per year, regardless of how many dependents are in school at the same time.

Can I take either the hope or lifetime learning credit and the tuition deduction?
No, you cannot claim the tuition deduction if you also take the Hope or Lifetime Learning credit for the same student in the same year. Be aware that credits are typically more beneficial. So, before you take the tuition deduction, determine whether you can qualify for either of the two education credits.

Where can I get more help?
Check the Internal Revenue Service website or consult with a Certified Public Accountant if you would like to learn more about how the tuition and fees deduction can save you valuable tax dollars.

You seek the expertise of CPAs at tax and audit time, of course. But CPAs also promote personal and professional financial security year round. Visit the CPA Referral Service on the MACPA website to search for a CPA in your geographical area or specific area of expertise.

This article was submitted by the Michigan Association of CPAs.

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