Understand Tax Benefits for Higher Education

Do you know that you can be able to deduct education expenses paid during the tax year? These tax benefits of higher education are applicable to yourself, your spouse, or your children. Note that this tax deduction cannot be applied if your tax filing status is married filing separately or when your dependent can claim an exemption for you as a dependent on his or her tax return. The qualified expenses are valid only for higher education.

Tax Benefits Higher Education and Tuition Fee Deduction

The deduction for tuition and fees will reduce your income amount subject to tax by up to $2500. This tax deduction is requested as an amendment to income. Hence, you can still claim this particular tax deduction if you have not recorded the deductions on Schedule A (Form 1040). When you do not qualify for the lifetime learning credits, this deduction can be handy.

Who can Claim the Deduction?

You are eligible to claim the tuition and fees deduction if you meet all the three requirements that are stated below:

  1. When you pay education expenses for your higher education.
  2. When you pay the education expenses on behalf of an eligible student.
  3. When the eligible student is yourself, or your dependent for whom you claimed the tax return.

Who cannot Claim the Deduction?

You cannot apply for the tax exemption under the following conditions:

  1. When your filing status is married filing separately.
  2. When another person can claim a tax exemption for you as a dependent on their tax return.
  3. When your modified annual gross income is greater than $80,000 and in the case of a joint return the annual income is $160,000.
  4. When you and your spouse are a nonresident alien.

Overview of Tuition and Fee Deduction

Maximum BenefitThe applicant can reduce their income subject to tax by up to $4,000
Limit on Modified Adjusted Gross Income (MAGI)$80,000 if the single, head of the family, or widow(er).
Where to take the deduction?As an amendment to income on Form 1040 or Form 1040 A
For whom the expenses are paid?An eligible student enrolled in an educational institution, whether the person is you, your spouse, or your dependent.
Deductible tuition and feesTuition and fees required for enrollment at an educational institution excluding personal and other family expenses.

Eligible Educational Institution

In order to qualify for the tuition and fee deduction, the education expenses and other related expenses must be made at an eligible educational institution.

An eligible educational institution is any vocational school, college, university, or other educational institute that is eligible to participate in a student aid program directed by the U.S. Department of Education. This also includes all accredited nonprofit, profit, and proprietary institutions. Educational institutions that are located outside the United States are also eligible if they participate in a student aid program administered by the United States Department of Education.