CARL WATTS & ASSOCIATES

June 22, 2015

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A younger relative of the student loan deduction, the tuition and fees deduction has had a tumultuous life ever since its birth in 2001 with the Economic Growth and Tax Relief Reconciliation Act. Officially instated as of 2002, this above-the-line deduction was scheduled to expire every two years or so, reinstated even retroactively, and scheduled to expire once more at the end of 2014. It is very likely that Congress will decide to extend it once again.

As an adjustment to income, the tuition and fees deduction has also been in constant competition with the American Opportunity Tax Credit and the Lifetime Learning Credit, but ultimately, it always adds up to what fits each particular situation best.

You may be able to take the deduction if you, your spouse, or a dependent you claim on your tax return was a student enrolled at or attending an eligible educational institution. The deduction is based on the amount of qualified education expenses you paid for the student for academic periods beginning in that tax year or beginning in the first three months of the following tax year.

Generally, in order to claim the deduction for education expenses for a dependent, you must have paid the expenses in 2014 and must claim an exemption for the student as a dependent on your 2014 tax return.

You cannot claim the tuition and fees deduction if any of the following apply:

  • Your filing status is married filing separately;
  • 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);
  • Your modified adjusted gross income (MAGI) is more than $80,000 ($160,000 if filing a joint return);
  • You (or your spouse) were a nonresident alien for any part of the year and did not elect to be treated as a resident alien for tax purposes.

You cannot claim a tuition and fees deduction for any student if you or anyone else claims an American opportunity or lifetime learning credit (Form 8863) in the same tax year with respect to expenses of the student for whom the qualified education expenses were paid.

However, a state tax credit will not disqualify you from claiming a tuition and fees deduction.

If the educational expenses also qualify as an allowable business expense, then you may be able to claim the tuition and fees deduction in conjunction with a business expense deduction, however you cannot deduct the same expenses twice.

Additionally, you cannot claim a deduction or credit based on expenses paid with tax-free scholarships, fellowships, grants, or education savings account funds such as a Coverdell education savings account, tax-free savings bond interest or employer-provided education assistance. The same rule applies to expenses you pay with a tax-exempt distribution from a qualified tuition plan, except that you can deduct qualified expenses you pay only with that part of the distribution that is a return of your contribution to the plan.

The tuition deduction is not restricted based on what year of college the student is in, or if they are a part-time or full-time student. Taking even one class can qualify the student for this deduction. Students who have been convicted of a felony drug offense remain eligible for the Tuition and Fees Deduction.

Generally, qualified education expenses are amounts paid for tuition and fees required for the student’s enrollment or attendance at an eligible educational institution. Required fees include amounts for books, supplies, and equipment used in a course of study if required to be paid to the institution as a condition of enrollment or attendance. It does not matter whether the expenses were paid in cash, by check, by credit or debit card, or with borrowed funds.

Adjustements to Income -
the Tuition & Fees Deduction
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Qualified education expenses may include nonacademic fees, such as student activity fees, athletic fees, or other expenses unrelated to the academic course of instruction, only if the fee must be paid to the institution as a condition of enrollment or attendance.

Qualified education expenses do not include amounts paid for:


  • Personal expenses (meaning room and board, insurance, medical expenses - including student health fees, transportation, and other similar personal, living, or family expenses);
  • Any course or other education involving sports, games, or hobbies, or any noncredit course, unless such course or other education is part of the student's degree program or helps the student acquire or improve job skills.

Qualified education expenses paid directly to the institution by someone other than you or the student are treated as paid to the student and then paid by the student to the institution.


An eligible educational institution is generally any accredited public, nonprofit, or proprietary (private) college, university, vocational school, or other postsecondary institution. Also, the institution must be eligible to participate in a student aid program administered by the Department of Education. Virtually all accredited postsecondary institutions meet this definition.

An eligible educational institution also includes certain educational institutions located outside the United States that are eligible to participate in a student aid program administered by the Department of Education.

The maximum amount of the tuition and fees deduction you can claim is $4,000 per year. The deduction is further limited by the following income ranges:


  • $4,000 maximum for income up to $65,000 ($130,000 for joint filers);

  • $2,000 maximum for income over $65,000 and up to $80,000 ($160,000 for joint filers);

  • no deduction for income over $80,000 ($160,000 for joint filers).

As a rule, schools report the amount of qualifying expenses to you and to the IRS using Form 1098-T.

You will have to report the tuition and fees tax deduction using Form 8917, Tuition and Fees Deduction. You must then enter the deduction on Form 1040, line 34, or Form 1040A, line 19.

If you are eligible for both the American Opportunity Tax Credit and the Tuition and Fees Deduction, you should consult with a tax professional to make sure you take the right decision for your specific family and financial situation. With the American Opportunity Tax Credit the financial value may be greater, but, since the Tuition and Fees Deduction reduces your AGI, you may qualify for other tax benefits or various means-tested federal benefit programs.

It is also worth mentioning that the Tuition and Fees Deduction is available for an unlimited number of years, unlike the American Opportunity Tax Credit, and that it is claimed per taxpayer, not per student.

With the right expert council by your side, you will be able to better take advantage of any of the tax deductions and credits that can ease the impact of educational expenses paid for your, your spouse, or your dependents.