Can I Claim Education Expenses for a Master's Degree?
If you pay higher education expenses for yourself or a qualified student, you can potentially enjoy some tax benefits in the form of credits and deductions. Tax benefits are available to students who are pursuing an undergraduate degree, as well as students enrolled at the master's degree level. Depending on your income, you may be able to claim the Lifetime Learning Credit, a tuition and fees deduction, or a deduction for education savings bond interest.
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Lifetime Learning Credit
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You can claim the Lifetime Learning Credit if you pay qualified education expenses for yourself, your spouse or another eligible dependent. Dependents must be under age 24. The Lifetime Learning Credit can be claimed for tuition and any other fees or expenses that are required as a condition of enrollment. Students must attend a college, university or other school that is eligible to participate in federal student aid programs. For the 2010 tax year, eligibility to claim the credit is limited to taxpayers with modified adjusted gross income of $120,000 or less for married couples filing jointly, or $60,000 for single filers. The maximum credit available for 2010 was $2,000.
Tuition and Fees Deduction
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The tuition and fee deduction allows taxpayers with a higher modified adjusted gross income to deduct certain education-related expenses. As of 2010, you could claim the deduction if your modified adjusted gross income was $160,000 or less for married couples filing jointly, or $80,000 or less for single filers. You cannot claim the deduction if you're married and filing separately. Qualified expenses include tuition, fees and other costs required for enrollment for yourself, your spouse or a dependent. For the 2010 tax year, eligible filers could deduct up to $4,000 for qualified expenses.
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Education Savings Bond Deduction
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If you cash in education savings bonds to cover college expenses, you can also claim a deduction for any interest you may have earned. To be eligible for the deduction, you must have paid qualified education expenses for yourself, your spouse or a dependent. As of 2010, your modified adjusted gross income must be $135,100 if you're married and filing jointly, or $85,100 and filing single. You must have cashed in Series EE bonds issued after 1989, or Series I bonds. You must also have been age 24 or older on the bond's issue date.
Considerations
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The IRS prohibits taxpayers from claiming multiple education tax credits and/or deductions for the same student in the same tax year. If you use funds from a tax-free savings vehicle, such as a Coverdell Education Savings Account or 529 plan to pay for college expenses, you cannot use the same expenses to claim education tax credits and/or deductions. You also cannot claim the Lifetime Learning Credit or a deduction for expenses paid with a tax-free scholarship or grant, or through an employer-sponsored education assistance program. Education credits and deductions cannot be claimed for medical care, room and board, insurance or other personal expenses.
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