What College Expenses Can I Deduct From My Federal Taxes?

Claiming all of your eligible educational expenses lowers your taxes.

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Tuition and fees are tax deductible college expenses. They can reduce the amount of your taxable income by up to $4,000. This deduction can be taken whether the student is yourself, your spouse or a dependent. To be eligible for this deduction, your adjusted gross income has to be $80,000 or less if you’re single and $160,000 or less if you’re married and filing jointly. You cannot take it if you are married and filing separately.

Tip

Tax deductions and credits are available to help with college expenses.

The tuition and fees you're deducting have to meet the IRS’s definition of qualified education expenses. They also have to have been paid to an eligible institution.

Qualified education expenses are things like tuition, books and supplies. Student activity and athletic fees can also be qualified expenses as long as they’re paid directly to the college or university as a condition of enrollment.

Eligible educational institutions are any accredited public or private nonprofit college, university or vocational school. The institution must be eligible to participate in the U.S. Department of Education’s student aid program. Most colleges, universities and vocational schools meet this definition.

You'll receive a Form 1098-T, Tuition Statement, from the school each year that shows what you paid for tuition and related expenses. The school also sends the information on this form to the IRS, so you don’t have to attach the 1098-T to your tax return.

Non-Tax Deductible College Expenses

College expenses that are not deductible include personal expenses like room and board, transportation, insurance and medical costs. Classes involving sports, gaming, hobbies and those taken for no credit are generally not deductible. If you can make a case that one of these courses helps you acquire or improve job skills, you may be able to deduct it. But don't count on it.

Educational Deductions and Credits 2018

Tax reform eliminated some popular tax breaks for 2018. Fortunately, educational benefits were not among them. In addition to deductions for qualified education expenses, a couple of tax credit programs are available. But no double dipping is allowed. You have to choose one of the credits or the deduction.

The American opportunity tax credit is applied directly to the tax you owe. The maximum you can claim is $2,500 per student, per year. This credit can only be claimed for four years. Students must be enrolled at least part-time and be working toward a degree or credential. The credit is most often claimed by parents for undergraduate students they're putting through college. This credit can be claimed on your 2018 tax return as long as you paid the expenses in 2017 and the student was enrolled for the first three months of 2018.

The lifetime learning credit is also applied directly to the tax you owe. The maximum you can claim is $2,000 per student per year. Unlike the American opportunity tax credit, there is no limit to the number of years you can claim it. It has no enrollment requirement either. You can be taking just one or two classes a semester and still benefit from the lifetime learning credit. This tax credit is commonly claimed by graduate students who are working and taking classes.

Form 1040 is being redesigned for the 2018 tax year. The IRS has so far published a draft. It’s about half the length of the old 1040. It also replaces the Forms 1040-A and 1040-EZ. The idea is to get more taxpayers using the same form and supplementing it with schedules as needed. It’s not yet clear where you’ll enter education deductions or credits on the new 1040, but the form will be finalized by January 2019.

Educational Deductions and Credits 2017

Tuition and fees deduction limits, and American opportunity tax credit and lifetime learning tax credits are the same for the 2017 tax year: $4,000, $2,500 and $2,000. To deduct tuition and fees on your 2017 return, complete Form 8917 and enter the information from it on Form 1040’s line 34. To claim the American opportunity tax credit or lifetime learning credit, complete Form 8863 and enter the information from it on Form 1040's line 50.

If you need help figuring out which tax break you qualify for and which one to take if you qualify for more than one, talk to your professional tax preparer.

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About the Author

LeDona Withaar has over 20 years’ experience as a securities industry professional and finance manager. She was an auditor for the National Association of Securities Dealers, a compliance manager for UNX, Inc. and a securities compliance specialist at Capital Group. She has an MBA from Simmons College in Boston, Massachusetts and a BA from Mills College in Oakland, California. She has done volunteer work in corporate development for nonprofit organizations such as the Boston Symphony Orchestra. She currently owns and operates her own small business in addition to writing for business and financial publications such as Budgeting the Nest, PocketSense and Zacks.


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