How Much of a School Tuition Is Tax Deductible?
In the United States, you can cut the cost of college down even further by claiming a deduction on your federal tax return for a portion of the price of tuition. The size of your deduction depends on the amount of income you earn. To claim the deduction, the money used for school does not have to come directly from your pocket. You can deduct the cost of tuition that you paid for with student loans.
Other People Are Reading
-
Income-based Deduction
-
Single people who earn less than $65,000 can deduct up to $4,000 in eligible tuition expenses in 2010. If you're single and earn more than $65,000, but less than $80,000, you can deduct up to $2,000. If you earn more than $80,000, you cannot deduct tuition. The income amounts are your adjusted gross income. The income limits are doubled for couples who are married filing jointly. Married couples who file separately cannot take a tuition and fees deduction.
Deductible and Non-deductible Expenses
-
You can only deduct tuition paid to a school, such as a college or other post-secondary school, that participates in the United States Department of Education student aid program. You cannot include the cost of room and board, even if you are living on campus, in your tuition deduction. The cost of books and other classroom materials can only be deducted if you need to pay the school for them directly as part of enrolling. Tuition that is paid with a tax-free grant or scholarship cannot be deducted.
-
Credit vs. Deduction
-
You also have the option of claiming an education tax credit on your return. You can either choose the credit or the income deduction, but not both. While a deduction subtracts the money from your income, a credit subtracts the money from the tax you owe. For tax year 2010, two credits are available, the Lifetime Learning Credit and the American Opportunity Credit. You can get a credit of up to $2,500 with the American Opportunity Credit or up to $2,000 with the Lifetime Learning Credit, as of 2011. Depending on your circumstances, the credit may grant you a larger tax refund than claiming a deduction.
Eligibility
-
You can only claim the American Opportunity Credit during the first four years of post-secondary education and only if you earn less than $90,000, if single, or less than $180,000, married filing jointly. The Lifetime Learning Credit is open to any post-secondary student, provided she earns less than $60,000 per year if single or $120,000 per year if married. If someone claims the student as dependent on his taxes, the student cannot take the deduction or the credit. The person claiming the student is eligible for the deduction or credit, though.
-
