Can I Deduct College Student Rent From My Income Tax?
College tuition is tax deductible. Dorm or apartment costs are not.
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The federal government knows college is expensive. Federal tax law offers multiple options for using any tuition you pay for yourself or your family to cut your taxes. Some of the student fees and equipment may be covered too, but none of the tax-saving options include room and board.
Tax Deduction
You can deduct up to $4,000 a year for tuition and related fees for yourself, your spouse or your tax dependent. That's $4,000 total, not $4,000 for each of you. Whichever of you is the student has to be taking at least one course at a qualified institution. You can only write off fees, books or supplies if it's mandatory the student pay these fees in order to attend. You claim the write-off directly on Form 1040, so you don't have to itemize your deductions to qualify.
Tax Credits
The American Opportunity Credit allows you to take $2,500 off your taxes -- not your taxable income -- for each qualifying student whose expenses you pay during the year. Those expenses include books and supplies. The Lifetime Learning Credit allows you a total of up to $2,000 a year, but usually only for tuition. You can only claim the American Opportunity Credit for four years for any given student, but you can keep taking the Lifetime Learning Credit year after year for the same person or people.
Coverdell Account
A Coverdell Education Savings Account lets you save money, then withdraw it to pay for educational expenses. As long as your withdrawals are less than the education costs, there's no tax on withdrawing contributions or earnings. Provided the student is enrolled at least half-time -- defined as half the school's full-time course load -- you can spend money from the account on room and board tax-free. Tax laws do limit how much you can spend on housing and get a deduction.
Considerations
The IRS doesn't allow you to double-dip. You can't claim both tax credits for the same student in the same year, nor can you take a tax deduction and a credit both. And you can't pay for tuition out of a Coverdell account, say, and still claim it as a tax deduction. Federal law also limits how big a tax break you can take if you have a high modified adjusted gross income. Generally, the tax credits offer the best deal, if you qualify.
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Writer Bio
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.