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Students in Midwestern disaster areas. The definition of qualified education expenses for the tuition and fees deduction is expanded for students attending an eligible educational institution in Midwestern disaster areas in the states of Arkansas, Illinois, Indiana, Iowa, Missouri, Nebraska, and Wisconsin. See Table 3-2 near the end of chapter 3 for a list of counties. See Students in Midwestern disaster areas , under Qualified Education Expenses, later in this chapter for more information.
You may be able to deduct qualified education expenses paid during the year for yourself, your spouse, or your dependent. You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. The qualified expenses must be for higher education, as explained later under Qualified Education Expenses .
The following rules will help you determine if you can claim the tuition and fees deduction.
Generally, you can claim the tuition and fees deduction if all three of the following requirements are met.
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You pay qualified education expenses of higher education.
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You pay the education expenses for an eligible student.
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The eligible student is yourself, your spouse, or your dependent for whom you claim an exemption on your tax return.
“Qualified Education Expenses” are defined on the next page. “Eligible students” are defined later under Who Is an Eligible Student . A “dependent for whom you claim an exemption” is defined later under Who Can Claim a Dependent's Expenses .
Table 6-1.Tuition and Fees Deduction at a Glance
Do not rely on this table alone. Refer to the text for complete details.
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Question | Answer | |
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What is the maximum benefit? | You can reduce your income subject to tax by up to $4,000. | |
Where is the deduction taken? | As an adjustment to income on Form 1040 or Form 1040A. | |
For whom must the expenses be paid? | A student enrolled in an eligible educational institution who is either: •you, •your spouse, or •your dependent for whom you claim an exemption. |
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What tuition and fees are deductible? | Tuition and fees required for enrollment or attendance at an eligible postsecondary educational institution, but not including personal, living, or family expenses, such as room and board. |
You cannot claim the tuition and fees deduction if any of the following apply.
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Your filing status is married filing separately.
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Another person can claim an exemption for you as a dependent on his or her tax return. You cannot take the deduction even if the other person does not actually claim that exemption.
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Your modified adjusted gross income (MAGI) is more than $80,000 ($160,000 if filing a joint return).
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You were a nonresident alien for any part of the year and did not elect to be treated as a resident alien for tax purposes. More information on nonresident aliens can be found in Publication 519, U.S. Tax Guide for Aliens.
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You or anyone else claims a Hope or lifetime learning credit in 2008 with respect to expenses of the student for whom the qualified education expenses were paid.
The tuition and fees deduction is based on qualified education expenses you pay for yourself, your spouse, or your dependent for whom you claim an exemption on your tax return. Generally, the deduction is allowed for qualified education 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 3 months of 2009.
For example, if you paid $1,500 in December 2008 for qualified tuition for the Spring 2009 semester beginning in January 2009, you may be able to use that $1,500 in figuring your 2008 deduction.
For purposes of the tuition and fees deduction, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution.
Example 1.
Jackson is a sophomore in University V's degree program in dentistry. This year, in addition to tuition, he is required to pay a fee to the university for the rental of the dental equipment he will use in this program. Because the equipment rental fee must be paid to University V for enrollment and attendance, Jackson's equipment rental fee is a qualified expense.
Example 2.
Donna and Charles, both first-year students at College W, are required to have certain books and other reading materials to use in their mandatory first-year classes. The college has no policy about how students should obtain these materials, but any student who purchases them from College W's bookstore will receive a bill directly from the college. Charles bought his books from a friend, so what he paid for them is not a qualified education expense. Donna bought hers at College W's bookstore. Although Donna paid College W directly for her first-year books and materials, her payment is not a qualified education expense because the books and materials are not required to be purchased from College W for enrollment or attendance at the institution.
Example 3.
When Marci enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. This activity fee is required of all students, and is used solely to fund on-campus organizations and activities run by students, such as the student newspaper and the student government. No portion of the fee covers personal expenses. Although labeled as a student activity fee, the fee is required for Marci's enrollment and attendance at College X. Therefore, it is a qualified expense.
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Books, supplies, and equipment required for enrollment or attendance at an eligible educational institution.
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For a special needs student, expenses that are necessary for that person's enrollment or attendance at an eligible educational institution.
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For a student who is at least a half-time student, the reasonable costs of room and board, but only to the extent that the costs are not more than the greater of the following two amounts.
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The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student.
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The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution.
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You cannot do any of the following.
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Deduct qualified education expenses you deduct under any other provision of the law, for example, as a business expense.
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Deduct qualified education expenses for a student on your income tax return if you or anyone else claims a Hope or lifetime learning credit for that same student in the same year.
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Deduct qualified education expenses that have been used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or a qualified tuition program (QTP). For a QTP, this applies only to the amount of tax-free earnings that were distributed, not to the recovery of contributions to the program. See Figuring the Taxable Portion of a Distribution in chapter 7 (Coverdell ESA) and in chapter 8 (QTP).
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Deduct qualified education expenses that have been paid with tax-free interest on U.S. savings bonds (Form 8815). See Figuring the Tax-Free Amount in chapter 10.
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Deduct qualified education expenses that have been paid with tax-free scholarship, grant, or employer- provided educational assistance. See the following section on Adjustments to Qualified Education Expenses.
If you pay qualified education expenses with certain tax-free funds, you cannot claim a deduction for those amounts. You must reduce the qualified education expenses by the amount of any tax-free educational assistance and refund(s) you received.
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The tax-free part of scholarships and fellowships (see chapter 1),
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Pell grants (see chapter 1),
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Employer-provided educational assistance (see chapter 11),
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Veterans' educational assistance (see chapter 1), and
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Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance.
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Payment for services, such as wages,
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A loan,
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A gift,
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An inheritance, or
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A withdrawal from the student's personal savings.
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The use of the money is restricted to costs of attendance (such as room and board) other than qualified education expenses.
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The use of the money is not restricted and is used to pay education expenses that are not qualified (such as room and board).
Example 1.
In 2008, Jackie paid $3,000 for tuition and $5,000 for room and board at University X. The university did not require her to pay any fees in addition to her tuition in order to enroll in or attend classes. To help pay these costs, she was awarded a $2,000 scholarship and a $4,000 student loan.
The terms of the scholarship state that it may be used to pay any of Jackie's college expenses. Because she applied it toward her tuition, the scholarship is tax free. Therefore, for purposes of figuring the tuition and fees deduction, she must first use the $2,000 scholarship to reduce her tuition (her only qualified education expense). The student loan is not tax-free educational assistance, so she does not use it to reduce her qualified expenses. Jackie is treated as having paid $1,000 in qualified education expenses ($3,000 tuition – $2,000 scholarship) in 2008.
Example 2.
The facts are the same as in Example 1, except that Jackie uses the $2,000 scholarship to pay room and board and, therefore, reports her entire scholarship as income on her tax return. In this case, the scholarship is allocated to expenses other than qualified education expenses. Jackie is treated as paying the entire $3,000 tuition with other funds, and can figure her tuition and fees deduction on the entire $3,000.
Qualified education expenses do not include amounts paid for:
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Insurance,
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Medical expenses (including student health fees),
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Room and board (see Students in Midwestern disaster areas under Qualified Education Expenses earlier, for an exception),
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Transportation, or
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Similar personal, living, or family expenses.
This is true even if the amount must be paid to the institution as a condition of enrollment or attendance.
For purposes of the tuition and fees deduction, an eligible student is a student who is enrolled in one or more courses at an eligible educational institution (as defined under Qualified Education Expenses , earlier). The student must have either a high school diploma or a General Educational Development (GED) credential.
Generally, in order to claim the tuition and fees deduction for qualified education expenses for a dependent, you must:
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Have paid the expenses, and
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Claim an exemption for the student as a dependent.
For you to be able to deduct qualified education expenses for your dependent, you must claim an exemption for that individual. You do this by listing your dependent's name and other required information on Form 1040, line 6c.
IF your dependent is an eligible student and you... | AND... | THEN... |
claim an exemption for your dependent | you paid all qualified education expenses for your dependent | only you can deduct the qualified education expenses that you paid. Your dependent cannot take a deduction. |
claim an exemption for your dependent | your dependent paid all qualified education expenses | no one is allowed to take a deduction. |
do not claim an exemption for your dependent, but are eligible to | you paid all qualified education expenses | no one is allowed to take a deduction. |
do not claim an exemption for your dependent, but are eligible to | your dependent paid all qualified education expenses | no one is allowed to take a deduction. |
are not eligible to claim an exemption for your dependent | you paid all qualified education expenses | only your dependent can deduct the amount you paid. The amount you paid is treated as a gift to your dependent. |
are not eligible to claim an exemption for your dependent | your dependent paid all qualified education expenses | only your dependent can take a deduction. |
Example.
In 2008, Ms. Baker makes a payment directly to an eligible educational institution for her grandson Dan's qualified education expenses. For purposes of deducting tuition and fees, Dan is treated as receiving the money as a gift from his grandmother and, in turn, paying his own qualified education expenses.
If an exemption cannot be claimed for Dan on anyone else's tax return, only Dan can claim a tuition and fees deduction for his grandmother's payment. If someone else can claim an exemption for Dan, no one will be allowed a deduction for Ms. Baker's payment.
The maximum tuition and fees deduction in 2008 is $4,000, $2,000, or $0, depending on the amount of your modified adjusted gross income (MAGI). See Effect of the Amount of Your Income on the Amount of Your Deduction , below.
If your modified adjusted gross income (MAGI) is not more than $65,000 ($130,000 if you are married filing jointly), your maximum tuition and fees deduction is $4,000. If your MAGI is larger than $65,000 ($130,000), but is not more than $80,000 ($160,000 if you are married filing jointly), your maximum deduction is $2,000. No tuition and fees deduction is allowed if your MAGI is larger than $80,000 ($160,000).
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Foreign earned income exclusion,
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Foreign housing exclusion,
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Foreign housing deduction,
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Exclusion of income for bona fide residents of American Samoa, and
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Exclusion of income for bona fide residents of Puerto Rico.
Table 6-2.Effect of MAGI on Maximum Tuition and Fees Deduction
IF your filing status is... | AND your MAGI is... | THEN your maximum tuition and fees deduction is... |
single, head of household, or qualifying widow(er) |
not more than $65,000 | $4,000. |
more than $65,000 but not more than $80,000 |
$2,000. | |
more than $80,000 | $0. | |
married filing joint return | not more than $130,000 | $4,000. |
more than $130,000 but not more than $160,000 |
$2,000. | |
more than $160,000 | $0. |
You claim a tuition and fees deduction by completing Form 8917 and submitting it with your Form 1040 or Form 1040A. Enter the deduction on Form 1040, line 34, or Form 1040A, line 19. A filled-in Form 8917 is shown at the end of this chapter.
If, after you file your 2008 tax return, you or someone else receives tax-free educational assistance for, or a refund of, an expense you used to figure a tuition and fees deduction on that return, you may have to repay all or part of the deduction. This applies to assistance and refunds received by the individual claiming the deduction, and, in the case of a student who claims the deduction, refunds received by anyone else who paid such expenses for the student.
You must include the assistance or refund in income in the year you receive it to the extent that the deduction of the refunded amount reduced your tax in 2008. Refigure your tuition and fees deduction for 2008 as if the tax-free assistance or refund was received in 2008. Subtract the amount of the refigured deduction from the amount of the deduction you claimed on your 2008 tax return. The result is the amount you must include in income (recapture). Add the recapture amount to your income for the year in which you received the assistance or refund by entering it on the “Other income” line of Form 1040. Form 1040A cannot be used. Your 2008 tax return does not change.
Example.
You paid $3,000 tuition and fees in December 2008, and your child began college in January 2009. You filed your 2008 tax return on February 15, 2009, and claimed a tuition and fees deduction of $3,000. After you filed your return, your child dropped two courses and you received a refund of $1,400. You must refigure your 2008 tuition and fees deduction using $1,600 of qualified education expenses instead of $3,000. The refigured deduction is $1,600. You must include the difference of $1,400 on the “Other income” line of your 2009 Form 1040.
Tim Pfister, a single taxpayer, enrolled full-time at a local college to earn a degree in engineering. This is the first year of his postsecondary education. During 2008, he paid $3,600 for his qualified 2008 tuition. Both he and the college meet all of the requirements for the tuition and fees deduction. Tim's total income (Form 1040, line 22) and MAGI are $26,000. His income tax liability, before credits, is $2,160. He figures his deduction of $3,600 as shown, later, on Form 8917.
Worksheet 6-1.MAGI for the Tuition and Fees Deduction
Use this worksheet if you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico. Before using this worksheet, you must complete Form 1040, lines 7 through 33 and figure any amount to be entered on the dotted line next to line 36.
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1. | Enter the amount from Form 1040, line 22 | 1. | ||||||||
2. | Enter the total from Form 1040, lines 23 through 33 | 2. | ||||||||
3. | Enter the total of any amounts entered on the dotted line next to Form 1040, line 36 | 3. | ||||||||
4. | Add lines 2 and 3 | 4. | ||||||||
5. | Subtract line 4 from line 1 | 5. | ||||||||
6. | Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18) |
6. | ||||||||
7. | Enter your foreign housing deduction (Form 2555, line 50) | 7. | ||||||||
8. | Enter the amount of income from Puerto Rico you are excluding | 8. | ||||||||
9. | Enter the amount of income from American Samoa you are excluding (Form 4563, line 15) |
9. | ||||||||
10. | Add lines 5 through 9. This is your modified adjusted gross income | 10. | ||||||||
Note.If the amount on line 10 is more than $80,000 ($160,000 if married filing jointly), you cannot take the deduction for tuition and fees. |
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