Paying for college can be a major financial burden for students and their parents, but tax credits and deductions may make higher education more affordable. In some cases, education deductions allow parents to write off the money they spend on a child's tuition and fees. However, most dorm room costs do not contribute to tax savings.
Tuition and Fees Deduction
The IRS allows parents to write off the cost of some higher education expenses, under the right conditions, using the tuition and fees deduction. For the parents to claim a deduction, the student must be a dependent of the parent or parents claiming the deduction. Financially independent students can claim their own deductions. To qualify, parents who hope to claim a child's education expenses must make less than $160,000 a year if they file jointly, or $80,000 in the case of a single parent, as of 2017. It is worth noting, that the Bipartisan Budget Act of 2018, enacted on Feb. 9, 2018, has retroactively extended the Tuition and Fees Deduction to cover the 2017 tax year. It is unclear whether or not this deduction will be available after 2017.
Only expenses that are mandatory and paid directly to a college or university are eligible for the tuition and fees deduction. This means that most costs associated with a dorm room, including room and board fees charged by the college or an outside property manager and the cost of furnishings, are not eligible for deductions. Instead the tuition and fees deduction applies to course fees, tuition, and instructional materials that the college requires all students to purchase as a condition of enrollment.
Eligible Dorm Deductions
Some expenses associated with a student's dorm room are eligible for tax deductions that parents can claim. These include technology costs that the college or university requires all students to pay. For example, a student's dorm room computer qualifies as an education expense if the school requires the student or parents to purchase it. As of 2017, the maximum amount of this type of deduction is $4,000, subtracted from a parent's adjusted gross income.
Student Loan Deductions
Parents can write off a portion of a child's dorm room costs indirectly by claiming a student loan interest deduction. This is possible only if the parents take out a student loan for their child and use the funds from the loan to pay for room and board, dorm furnishings and other related expenses. The monthly interest on the loan is tax deductible, up to $2,500 annually, as of 2018.
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