Massasoit - Tuition & Fees Deductions

Understanding the Tuition and Fees Tax Deduction

What Is It?

Tuition and Fees Tax Deduction can reduce taxable income by as much as $4,000 for 2008. This deduction may benefit taxpayers who do not qualify for either the Hope or Lifetime Learning Education Tax Credits. It is taken as an adjustment to income, which means you can claim this deduction even if you do not itemize deductions on Schedule A of Form 1040.

Up to $4,000 may be deducted from tuition and fees required for enrollment or attendance at an eligible postsecondary institution. Personal living and family expenses, including room and board, insurance, medical, and transportation, are not deductible expenses.

The exact amount of the Tuition and Fees Tax Deduction depends on the amount of qualified tuition and related expenses paid for eligible students.

Who Qualifies?

The Taxpayer: An eligible taxpayer must file a federal tax return to claim the Tuition and Fees Tax Deduction. The taxpayer must also claim an eligible student (an individual enrolled in one or more courses at an eligible educational institution) as a dependent on the tax return. The deduction may also be for the taxpayer or the taxpayer's spouse.

The amount of qualified education expenses that can be deducted through the Tuition and Fees Deduction remained level for the 2008 tax year at $4,000 for taxpayers with a modified adjusted gross income (AGI) of $65,000 or less ($130,000 or less for married couples filing jointly). The maximum Tuition and Fees Deduction is $2,000 for taxpayers with a modified AGI greater than $65,000 ($130,000 for married couples filing jointly), but not greater than $80,000 ($160,000 for married couples filing jointly). Taxpayers with a modified AGI greater than $80,000 ($160,000 for married couples filing jointly) are not eligible for this deduction.

The Student: An eligible student must be enrolled in one or more courses at an eligible educational institution. An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education. According to the IRS, "it includes virtually all accredited, public, nonprofit, and proprietary postsecondary institutions." Colleges can provide information on whether they meet this requirement. Students may claim this deduction for themselves if they are not claimed as a dependent by another taxpayer.

How Do You Get It?

An eligible institution that received payment for tuition and fees in the 2008 tax year must issue IRS Form 1098-T (the Tuition Statement) to each student by January 31, 2009. The information on that form will help taxpayers determine whether they can claim a deduction for 2008. An institution may choose to report payments received (box 1), or amounts billed (box 2) for qualified education expenses. However, the amount in boxes 1 and 2 may be different than what you actually paid. Only use the amounts you paid in 2008 for qualified education expenses.

When Is It Available?

Generally, the deduction is allowed for qualified tuition and expenses paid in 2008 in connection with enrollment at an institution of higher education during 2008 or for an academic period beginning in 2008 or in the first three months of 2009. For instance, if you paid $1,500 in December 2008 for qualified tuition for a spring 2008 semester that begins in January 2009, that $1,500 can be used to figure the 2008 deduction.

Can A Family Claim Multiple Benefits?

Taxpayers may claim this deduction along with a Hope credit, a Lifetime Learning credit, and an exclusion from gross income for certain distributions from qualified state tuition programs or education IRAs, if a different student is used for each deduction, credit, or exclusion AND the family does not exceed the Lifetime Learning maximum per family.

Taxpayers cannot take the Tuition and Fees Tax Deduction if they deduct tuition and fees expenses under any other provision of the law (for example, as a business expense).

This deduction cannot be claimed if the tuition and fees were paid with tax-free scholarships, grants (including Federal Pell Grants), or other educational assistance including employer-provided education assistance and other non-taxable benefits received to pay for education expenses.

Last Update: February 10, 2009

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