You may be able to deduct qualified tuition and related expenses that you pay for yourself, your spouse, or a dependent. To determine whether your expenses are qualified, refer to Topic 605 or Publication 970, Tax Benefits for Education. You do not have to itemize to take this deduction because it is treated as an adjustment to income. For tax year 2004, you can claim qualified tuition and fees as either: (1) an adjustment to income, as directed above; or (2) a Hope or Lifetime Learning credit.

You cannot deduct higher education expenses on your income tax return if you or anyone else claims a Hope or Lifetime learning credit based on those 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 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. Also, you cannot deduct qualified education expenses you deduct anywhere else on your return, such as a business expense. Refer to Topics 310, 403 and 421.

In 2004, if your modified adjusted gross income (MAGI) does not exceed $65,000 ($130,000 if married filing jointly) you are entitled to a maximum deduction of $4,000 per year. If your MAGI is greater than $65,000 ($130,000), but is not more than $80,000 ($160,000 if you are married filing jointly), your maximum tuition and fees deduction is $2,000. No tuition and fees deduction is allowed if your MAGI is larger than $80,000 ($160,000).