Tuition and Fees Deduction

This is archived information that pertains only to the 2003 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Generally, you cannot deduct education and training expenses for yourself, your spouse (if married) or your dependent as a business expense unless the education or training:

Maintains or improves a skill required in a trade or business you are currently engaged in,
Meets the express requirements of your employer, or
Meets the requirements of law or regulations which are conditions of continuing your employment.

You may be able to deduct qualified education tuition and related expenses that you pay. You do not have to itemize to take this deduction. For tax year 2003, you can claim your education expenses either as an adjustment to income or as a Hope or Lifetime learning credit. Qualified expenses are the same as for the Hope and Lifetime learning credit. Refer to Topic 605 or Publication 970, Tax Benefits for Education.

You cannot deduct higher education expenses on your income tax return and also claim a Lifetime learning credit based on those SAME expenses. Nor can you claim both the Hope and Lifetime learning credit in the same year for the same expenses.

You cannot claim a deduction or credit based on expenses paid with tax-free scholarship, fellowship, grant, 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 state 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. Refer to Topic 310 Topic 403 Topic 421.

In 2003 if your adjusted gross income does not exceed $65,000 ($130,000 if married filing jointly) you are entitled to a maximum deduction of $3,000 per year. If your adjusted gross income is greater than these amounts you may not take this deduction.

In 2004 and 2005 the maximum deduction is $4,000 per year if your adjusted gross income is $65,000 ($130,000 if married filing jointly) or less. If your adjusted gross income is between $65,000 and $80,000 (between $130,000 and $160,000 if married filing jointly) the maximum deduction is $2,000. If your adjusted gross income is greater than these amounts you may not take this deduction.