| Publication 970 |
2008 Tax Year |
6.
Tuition and Fees Deduction
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
.
What is the tax benefit of the tuition and fees deduction.
The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000.
This deduction is taken as an adjustment to income. This means you can claim this deduction even if you do not itemize
deductions on Schedule A (Form 1040). This deduction may be beneficial to you if you cannot take either the Hope or lifetime
learning credit because your income is too high.
Table 6-1 summarizes the features of the tuition and fees deduction.
You may be able to take the Hope or lifetime learning credit for your education expenses instead of a tuition and fees deduction.
You can choose the one that will give you the lower tax. See chapters 2 and 3 for details about the credits.
Can You Claim the Deduction
The following rules will help you determine if you can claim the tuition and fees deduction.
Who Can Claim the Deduction
Generally, you can claim the tuition and fees deduction if all three of the following requirements are met.
-
You pay qualified education expenses of higher education.
-
You pay the education expenses for an eligible student.
-
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.
|
| Question |
|
Answer |
| 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.
|
| 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.
|
Who Cannot Claim the Deduction
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 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.
-
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.
Academic period.
An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session)
as reasonably determined by an educational institution. In the case of an educational institution that uses credit hours or
clock hours and does not have academic terms, each payment period can be treated as an academic period.
Paid with borrowed funds.
You can claim a tuition and fees deduction for qualified education expenses paid with the proceeds of a loan. You
use the expenses to figure the deduction for the year in which the expenses are paid, not the year in which the loan is repaid.
Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's
account.
Student withdraws from class(es).
You can claim a tuition and fees deduction for qualified education expenses not refunded when a student withdraws.
Qualified Education Expenses
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.
Eligible educational institution.
An eligible educational institution is any college, university, vocational school, or other postsecondary educational
institution eligible to participate in a student aid program administered by the U.S. Department of Education. It includes
virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. The
educational institution should be able to tell you if it is an eligible educational institution.
Certain educational institutions located outside the United States also participate in the U.S. Department of Education's
Federal Student Aid (FSA) programs.
Related expenses.
Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education
expenses only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance.
In the following examples, assume that each student is an eligible student and each college or university 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.
Students in Midwestern disaster areas.
The definition of qualified education expenses is expanded for students in these areas. In addition to tuition and
fees required for enrollment or attendance at an eligible educational institution, qualified education expenses for students
in Midwestern disaster areas include the following.
-
Books, supplies, and equipment required for enrollment or attendance at an eligible educational institution.
-
For a special needs student, expenses that are necessary for that person's enrollment or attendance at an eligible educational
institution.
-
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.
-
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.
-
The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution.
You will need to contact the eligible educational institution for qualified room and board costs.
No Double Benefit Allowed
You cannot do any of the following.
-
Deduct qualified education expenses you deduct under any other provision of the law, for example, as a business expense.
-
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.
-
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).
-
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.
-
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.
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.
Tax-free educational assistance.
This includes:
-
The tax-free part of scholarships and fellowships (see chapter 1),
-
Pell grants (see chapter 1),
-
Employer-provided educational assistance (see chapter 11),
-
Veterans' educational assistance (see chapter 1), and
-
Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance.
Refunds.
Qualified education expenses do not include expenses for which you, or someone else who paid qualified education expenses
on behalf of a student, receive a refund. (For information on expenses paid by a dependent student or third party, see
Who Can Claim a Dependent's Expenses
, later.)
If a refund of expenses paid in 2008 is received before you file your tax return for 2008, simply reduce the amount
of the expenses paid by the amount of the refund received. If the refund is received after you file your 2008 tax return,
see
When Must the Deduction Be Repaid (Recaptured)
, at the end of this chapter.
You are considered to receive a refund of expenses when an eligible educational institution refunds loan proceeds
to the lender on behalf of the borrower. Follow the above instructions according to when you are considered to receive the
refund.
Amounts that do not reduce qualified education expenses.
Do not reduce qualified education expenses by amounts paid with funds the student receives as:
-
Payment for services, such as wages,
-
A loan,
-
A gift,
-
An inheritance, or
-
A withdrawal from the student's personal savings.
Do not reduce the qualified education expenses by any scholarship or fellowship reported as income on the student's
tax return in the following situations.
-
The use of the money is restricted to costs of attendance (such as room and board) other than qualified education expenses.
-
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.
Expenses That Do Not Qualify
Qualified education expenses do not include amounts paid for:
-
Insurance,
-
Medical expenses (including student health fees),
-
Room and board (see
Students in Midwestern disaster areas
under Qualified Education Expenses earlier, for an exception),
-
Transportation, or
-
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.
Sports, games, hobbies, and noncredit courses.
Qualified education expenses generally do not include expenses that relate to any course of instruction or other education
that involves sports, games or hobbies, or any noncredit course. However, if the course of instruction or other education
is part of the student's degree program, these expenses can qualify.
Comprehensive or bundled fees.
Some eligible educational institutions combine all of their fees for an academic period into one amount. If you do
not receive, or do not have access to, an allocation showing how much you paid for qualified education expenses and how much
you paid for personal expenses, such as those listed above, contact the institution. The institution is required to make this
allocation and provide you with the amount you paid (or were billed) for qualified education expenses on Form 1098-T, Tuition
Statement. See
Figuring the Deduction
, later, for more information about Form 1098-T.
Who Is an Eligible Student
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.
Who Can Claim a Dependent's Expenses
Generally, in order to claim the tuition and fees deduction for qualified education expenses for a dependent, you must:
-
Have paid the expenses, and
-
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.
Expenses paid by dependent.
If your dependent pays qualified education expenses and you can claim an exemption for your dependent on your tax
return, no one can take a tuition and fees deduction for those expenses. Neither you nor your dependent can deduct the expenses.
For purposes of the tuition and fees deduction, you are not treated as paying any expenses actually paid by a dependent for
whom you or anyone other than the dependent can claim an exemption. This rule applies even if you do not claim an exemption
for your dependent on your tax return.
However, if your dependent pays qualified education expenses and no one can claim an exemption for your dependent
on his or her tax return, your dependent can take a tuition and fees deduction for those expenses, even if they are paid with
the proceeds of a student loan.
Expenses paid by you.
If you claim an exemption for a dependent who is an eligible student, only you can include any expenses you paid when
figuring your tuition and fees deduction. If neither you nor anyone else can claim an exemption for a dependent who is an
eligible student, the dependent can include any expenses you paid when figuring the amount of his or her tuition and fees
deduction.
Expenses paid under divorce decree.
Qualified education expenses paid directly to an eligible educational institution for a student under a court-approved
divorce decree are treated as paid by the student. Only the student would be eligible to take a tuition and fees deduction
for that payment, and then only if no one else could claim an exemption for the student.
Expenses paid by others.
Someone other than you, your spouse, or your dependent (such as a relative or former spouse) may make a payment directly
to an eligible educational institution to pay for an eligible student's qualified education expenses. In this case, the student
is treated as receiving the payment from the other person and, in turn, paying the institution. If you claim, or can claim,
an exemption on your tax return for the student, you are not considered to have paid the expenses and you cannot deduct them.
If the student is not a dependent, only the student can deduct payments made directly to the institution for his or her expenses.
If the student is your dependent, no one can deduct the payments.
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.
Tuition reduction.
When an eligible educational institution provides a reduction in tuition to an employee of the institution (or spouse
or dependent child of an employee), the amount of the reduction may or may not be taxable. If it is taxable, the employee
is treated as receiving a payment of that amount and, in turn, paying it to the educational institution on behalf of the student.
For more information on tuition reductions, see
Qualified Tuition Reduction
in chapter 1.
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.
Form 1098-T.
To help you figure your tuition and fees deduction, you should receive Form 1098-T. Generally, an eligible educational
institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to each enrolled student by
February 2, 2009. An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified
education expenses. However, the amount in boxes 1 and 2 of Form 1098-T may be different than what you actually paid. When
figuring the deduction, use only the amounts you paid in 2008 for qualified education expenses.
In addition, your Form 1098-T should give you other information for that institution, such as adjustments made for
prior years, the amount of scholarships or grants, reimbursements or refunds, and whether you were enrolled at least half-time
or were a graduate student.
The eligible educational institution may ask for a completed Form W-9S, Request for Student's or Borrower's Taxpayer Identification
Number and Certification, or similar statement to obtain the student's name, address, and taxpayer identification number.
Effect of the Amount of Your Income on the Amount of Your Deduction
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).
Modified adjusted gross income (MAGI).
For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return before subtracting
any deduction for tuition and fees. However, as discussed below, there may be other modifications.
MAGI when using Form 1040.
If you file Form 1040, your MAGI is the AGI on line 38 of that form, figured without taking into account any amount
on line 34 (Tuition and fees deduction) or line 35 (Domestic production activities deduction), and modified by adding back
any:
-
Foreign earned income exclusion,
-
Foreign housing exclusion,
-
Foreign housing deduction,
-
Exclusion of income for bona fide residents of American Samoa, and
-
Exclusion of income for bona fide residents of Puerto Rico.
Table 6-2 shows how the amount of your MAGI can affect your tuition and fees deduction.
You can use Worksheet 6-1 on the next page to figure your MAGI.
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.
When Must the Deduction Be Repaid (Recaptured)
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 |
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1. |
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| 2. |
Enter the total from Form 1040, lines 23 through 33 |
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2. |
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| 3. |
Enter the total of any amounts entered on the dotted line next to Form 1040, line 36 |
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3. |
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| 4. |
Add lines 2 and 3 |
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4. |
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| 5. |
Subtract line 4 from line 1 |
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5. |
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| 6. |
Enter your foreign earned income exclusion and/or housing
exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)
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6. |
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| 7. |
Enter your foreign housing deduction (Form 2555, line 50) |
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7. |
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| 8. |
Enter the amount of income from Puerto Rico you are excluding |
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8. |
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| 9. |
Enter the amount of income from American Samoa you are
excluding (Form 4563, line 15)
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9. |
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| 10. |
Add lines 5 through 9. This is your modified adjusted gross income |
|
10. |
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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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