After 2016, the Tuition and Fees Deduction will expire. Currently, you are eligible to deduct up to $4,000 from your taxable income for tuition expenses that you paid for either yourself, your spouse, or your dependents.
Expenses paid in 2016 can be deducted if they were paid for one of the following purposes:
- Education during the tax year
- Education beginning during the tax year
- Education that starts within the first three months of the next year
Expenses that include enrollment fees and tuition qualify for the deduction, if they are used to attend an accredited post-secondary institution of higher education. Expenses that do not count toward the deduction include:
- Room and board
- Student health insurance and other personal expenses
- Books and supplies, unless required to buy them from the school
- Courses related to sports, games, or hobbies, unless mandatory as part of the degree program
Should you receive any assistance with these expenses, in the form of scholarships, grants, or other nontaxable income in regards to educational use, you’ll need to subtract them before taking the deduction. As an example, an employer sponsored tuition reimbursement plan covers $1,000 of a course that costs $1,500 total. For the deduction, only $500 qualifies.
The deduction can be taken for expenses you paid for either yourself, your spouse, or your dependent. The only two exceptions to this rule are:
- if you are claimed as a dependent on another taxpayer’s return, you can’t take the deduction for higher education expenses
- if you are married but file a separate return, you can’t claim the deduction
Depending on your modified adjusted gross income (MAGI) the deduction amounts are $0, $2,000 or $4,000.
The income limits for different filing status are as follows:
- $65,000 or less nets a $4,000 deduction
- $65,001 to $80,000 nets a $2,000 deduction
- $80,0001 and greater – the deduction is eliminated
- $130,000 or less is a $4,000 deduction
- $130,001 to $160,000 is a $2,000 deduction
- $160,001 and greater – the deduction is eliminated
You can’t deduct the same expense twice.
That means if you use another provision of the tax rules to deduct an expense, you aren’t able to use it for the Tuition and Fees deduction either. Additionally, you are unable to deduct expenses you paid using money that is tax-free. Expenses are ineligible to deducted if paid by:
- Tax-free savings bond interest
- Tax-free earnings from Section 529 plans and qualified state tuition programs
- Tax-free earnings from Coverdell Education Savings Accounts
This deduction cannot be combined with educational credits such as the American Opportunity or Lifetime Learning credits when applied to the same student in the same year.