Publication 508 |
2000 Tax Year |
What Educational Expenses Are Deductible?
If your education meets the requirements described earlier under
Qualifying Education, you can generally deduct your
educational expenses. If you are not self-employed, you can deduct
educational expenses only if you itemize your deductions.
You cannot deduct expenses related to tax-exempt and excluded
income.
Deductible expenses.
The following educational expenses can be deducted.
- Tuition, books, supplies, lab fees, and similar
items.
- Certain transportation and travel costs.
- Other educational expenses, such as costs of research and
typing when writing a paper as part of an educational program.
Nondeductible expenses.
Educational expenses do not include personal or capital expenses.
For example, you cannot deduct the dollar value of vacation time or
annual leave you take to attend classes. This amount is a personal
expense.
Unclaimed reimbursement.
If you do not claim reimbursement that you are entitled to receive
from your employer, you cannot deduct the expenses that apply to the
reimbursement.
Example.
Your employer agrees to pay your educational expenses if you file a
voucher showing your expenses. You do not file a voucher, and you do
not get reimbursed. Because you did not file a voucher, you cannot
deduct the expenses on your tax return.
Transportation Expenses
If your education qualifies, you can deduct local transportation
costs of going directly from work to school. If you are regularly
employed and go to school on a temporary basis, you can
also deduct the costs of returning from school to home.
If your attendance at school is realistically expected to last (and
does in fact last) for 1 year or less, you go to school on a temporary
basis (unless there are facts and circumstances that would indicate
otherwise). If your attendance at school is realistically expected to
last for more than 1 year or if there is no realistic expectation that
the attendance will last for 1 year or less, the attendance is not
temporary, regardless of whether it actually lasts for more than 1
year. If your attendance at school initially is realistically expected
to last for 1 year or less, but at some later date the attendance is
realistically expected to last more than 1 year, that attendance will
be treated as temporary (unless there are facts and circumstances that
would indicate otherwise) until your expectation changes. It will not
be treated as temporary after the date you determine it will last more
than 1 year.
Attendance at school on a temporary basis was formerly defined as
attendance on an irregular or short-term basis (generally a matter of
days or weeks).
You can file an amended return on Form 1040X, Amended U.S.
Individual Income Tax Return, for any year in which you used the
former definition of attendance on a temporary basis. However, you
generally must file the amended return within 3 years from the time
you filed the original return or within 2 years from the time you paid
the tax, whichever is later.
If you are regularly employed and go directly from home to school
on a temporary basis, you can deduct the round-trip costs of
transportation between your home and school. This is true regardless
of the location of the school, the distance traveled, or whether you
attend school on nonwork days.
Transportation expenses include the actual costs of bus, subway,
cab, or other fares, as well as the costs of using your car.
Transportation expenses do not include amounts spent for travel,
meals, or lodging while you are away from home overnight.
Example 1.
You regularly work in Camden, New Jersey, and go directly from work
to home. You also attend school every night for 3 months to take a
course that improves your job skills. Since you are attending school
on a temporary basis, you can deduct your daily round-trip
transportation expenses in going between home and school. This is true
regardless of the distance traveled.
Example 2.
Assume the same facts as in Example 1 except that on
certain nights you go directly from work to school and then home. You
can deduct your transportation expenses from your regular work site to
school and then home.
Example 3.
Assume the same facts as in Example 1 except that you
attend the school for 9 months on Saturdays, nonwork days. Since you
are attending school on a temporary basis, you can deduct your
round-trip transportation expenses in going between home and school.
Example 4.
Assume the same facts as in Example 1 except that you
attend classes twice a week for 15 months. Since your attendance in
school is not considered temporary, you cannot deduct your
transportation expenses in going between home and school. If you go
directly from work to school, you can deduct the one-way
transportation expenses of going from work to school. If you go from
work to home to school and return home, your transportation expenses
cannot be more than if you had gone directly from work to school.
Using your car.
If you use your car (whether you own or lease it) for
transportation to school, you can deduct your actual expenses or use
the standard mileage rate to figure the amount you can deduct. The
standard mileage rate for 2000 is 32 1/2 cents per mile.
Whichever method you use, you can also deduct parking fees and tolls.
See Publication 463
for information on deducting your actual expenses
of using a car.
Travel Expenses
You can deduct expenses for travel, meals (subject to the 50% limit
discussed later), and lodging if:
- You travel overnight to obtain qualified education,
and
- The main purpose of the trip is to attend a work-related
course or seminar.
Travel expenses for qualifying education are treated the same as
travel expenses for other employee business purposes. For more
information, see Publication 463.
You cannot deduct expenses for personal activities, such as
sightseeing, visiting, or entertaining.
Mainly personal travel.
If your travel away from home is mainly personal, you cannot deduct
all of your expenses for travel, meals, and lodging. You can deduct
only your expenses for lodging and 50% of your expenses for meals
during the time you attend the qualified educational activities.
Whether a trip's purpose is mainly personal or educational depends
upon the facts and circumstances. An important factor is the
comparison of time spent on personal activities with time spent on
educational activities. If you spend more time on personal activities,
the trip is considered mainly educational only if you can show a
substantial nonpersonal reason for traveling to a particular location.
Example 1.
John works in Newark, New Jersey. He traveled to Chicago to take a
deductible 1-week course at the request of his employer. While there,
he took a sightseeing trip, entertained some friends, and took a side
trip to Pleasantville for a day. Since the trip was mainly for
business, he can deduct his round-trip airfare to Chicago, but he
cannot deduct his transportation expenses of going to Pleasantville.
He can deduct only the meals (subject to the 50% limit) and lodging
connected with his educational activities.
Example 2.
Sue works in Boston. She went to a university in Michigan to take a
qualifying course for work. She took one course, which is one-fourth
of a full course load of study. She spent the rest of the time on
personal activities. Her trip is mainly personal because three-fourths
of her time is considered personal time and her reasons for taking the
course in Michigan were all personal. She cannot deduct the cost of
her round-trip train ticket to Michigan. She can deduct one-fourth of
the meals (subject to the 50% limit) and lodging costs for the time
she attended the university.
Example 3.
Dave works in Nashville and recently traveled to California to take
a deductible 2-week seminar. While there, he spent an extra 8 weeks on
personal activities. The facts, including the extra 8-week stay, show
that his main purpose was to take a vacation. He cannot deduct his
round-trip airfare or his meals and lodging for the 8 weeks. He can
deduct only his expenses for meals (subject to the 50% limit) and
lodging for the 2 weeks he attended the seminar.
Cruises and conventions.
Certain cruises and conventions offer seminars or courses as part
of their itinerary. Even if these are work related, your deduction for
travel may be limited. This applies to:
- Travel by ocean liner, cruise ship, or other form of luxury
water transportation, and
- Conventions outside the North American area.
For a discussion of the limits on travel expense deductions that
apply to cruises and conventions, see Luxury Water Travel
and Conventions in Publication 463.
Meal Expenses
If your educational expenses qualify for deduction, you can deduct
the cost of meals that qualify as travel expenses.
50% limit.
You can deduct only 50% of your qualifying business-related meals
if you were not reimbursed by your employer. This includes meals while
traveling away from home to obtain your education.
Employees must use Form 2106 or Form 2106-EZ to apply the 50%
limit.
Travel as Education
You cannot deduct the cost of travel that is a form of education,
even if it is directly related to your duties in your work or
business.
Example.
You are a French language teacher. While on sabbatical leave
granted for travel, you traveled through France to improve your
knowledge of the French language. You chose your itinerary and most of
your activities to improve your French language skills. You cannot
deduct your travel expenses as educational expenses. This is true even
if you spent most of your time learning French by visiting French
schools and families, attending movies or plays, and engaging in
similar activities.
Student Loan
Interest Expense
You may be able to deduct interest you pay on a qualified student
loan. This deduction is available whether or not the education is
work-related, and even if you do not itemize deductions on Schedule A
(Form 1040). For more information on the deduction of student loan
interest, see Publication 970.
Expenses Relating to
Tax-Exempt and
Excluded Income
The following discussions explain how to treat qualified
educational expenses that are related to tax-exempt or excluded income
from scholarships, veterans' educational assistance, and the Education
Savings Bond Program.
Scholarships
If you receive a tax-exempt scholarship, you must subtract the
amount of the scholarship from your qualified educational expenses.
Example.
Your tuition for qualifying education is $8,000. You receive a
tax-exempt scholarship of $6,000 to help pay the tuition. You can
include only $2,000 ($8,000 - $6,000) as qualified educational
expenses.
Part of scholarship is tax exempt.
If only part of your scholarship is tax exempt, you subtract only
the tax-exempt part from your qualified educational expenses.
Example.
Your tuition for qualifying education is $8,000. You receive a
$6,000 scholarship of which $4,000 is tax exempt and $2,000 is
taxable. You can include only $4,000 ($8,000 - $4,000) as
qualified educational expenses.
Part of tuition qualifies.
If only part of your tuition is for qualifying education, you
subtract only part of the tax-exempt scholarship from the qualified
educational expenses.
Example.
Your total tuition is $8,000. The tuition for the courses that are
qualifying education is $3,200. Your tax-exempt scholarship is $6,000.
To determine the part of the scholarship that must be subtracted from
the qualified educational expenses, multiply the scholarship ($6,000)
by a fraction. The numerator (top number) of the fraction is the
tuition for qualifying education ($3,200), and the denominator (bottom
number) is the total tuition ($8,000).
formula: tax-exempt scholarshipThe result, $2,400, is the amount of the
scholarship you must subtract from your qualified educational
expenses. You can include only $800 ($3,200 - $2,400) as
qualified educational expenses.
More information.
For more information on scholarships, see Publication 520.
Veterans
Any educational assistance payment you receive from the Department
of Veterans Affairs (VA) is tax exempt. This includes payments for
living expenses.
VA programs that pay educational expenses only.
If you receive payments under a VA program that pays only for
educational expenses, such as tuition, books, and similar expenses,
you must subtract the part of the VA payment that applies to
qualifying education from your qualified educational expenses.
Example.
Your tuition is $1,000 and all classes are qualifying education.
You receive a $780 educational assistance payment from the VA that is
solely for educational expenses. You can include only $220 ($1,000
- $780) as qualified educational expenses.
VA programs that pay living expenses and educational
expenses.
If you receive payments under a VA program that pays for both
living expenses and educational expenses, you must subtract from your
qualified educational expenses only the part of the VA payment that
applies to educational expenses for qualifying education.
Generally, 50% of the VA payments are for subsistence or living
expenses. For married veterans, the percentage is higher.
Example.
Your tuition is $1,000 and all classes are qualifying education.
You receive a $780 educational assistance payment from the VA. Under
this program, $390 of the payment is for living expenses and $390 is
for educational expenses. You can include only $610 ($1,000 -
$390) as qualified educational expenses.
VA payments used for both qualifying and nonqualifying
education.
If you use a VA payment for educational expenses to pay for both
qualifying and nonqualifying education, you must subtract only part of
the payment from qualified educational expenses.
Example.
Your tuition and fees for three courses are $1,500. Only two of the
three courses are qualifying education. The two courses cost $1,000.
You receive a $780 educational assistance payment from the VA under a
program that covers tuition and fees only. The payment does not
include any amount for living expenses. To determine the part of the
VA payment to subtract, multiply the payment ($780) by a fraction. The
numerator (top number) is the cost of the qualifying education
($1,000) and the denominator (bottom number) is the total cost of your
qualifying and nonqualifying education ($1,500).
Formula: VA paymentsThe result ($520) is the amount you must subtract
from the cost of your qualified educational expenses. You can include
$480 ($1,000 - $520) as qualified educational expenses.
Education Savings
Bond Program
You may be able to exclude from your gross income all or part of
the interest you received on the redemption of qualified U.S. savings
bonds if you pay qualified higher educational expenses during the same
year. This exclusion is known as the Education Savings Bond
Program.
If you exclude interest under the Education Savings Bond Program,
you must subtract the excluded interest from your qualified
educational expenses.
See chapter 1 of Publication 550,
Investment Income and
Expenses, for more information on the Education Savings Bond
Program.
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