With the passage of new legislation like the Bipartisan Budget Act of 2018, some tax credits or deductions that helped current college students and graduates ease their tax burden vanished. One deduction that was not renewed was the tuition and fees deduction.
While you cannot claim this deduction on taxes after 2017, it is still an important deduction to understand, as you can claim it on taxes from 2017 or earlier and may return in the future. In the past, Congress allowed the tuition and fees deduction to expire, just to bring it back a few years later. If Congress decides to reinstate the deduction in the future, taxpayers will be able to apply the deduction retroactively.
Qualifying for the Tuition & Fees Deduction
When the tuition and fees tax deduction was in place, you could claim up to $4,000 per year for any qualifying tuition and fees that you paid for yourself, your spouse, or a dependent child. Any qualifying expenses that the Internal Revenue Service (IRS) considered tuition or fees could be deducted from your taxes.
Taking the tuition and fees deduction in 2017 or prior tax years does not disqualify you from taking the student loan interest deduction, which is still in effect for 2018 and later tax years.
This tax deduction is sometimes called an above the line deduction, meaning the money is listed above the line on the front of your tax form, and itemizing expenses is not required. To qualify:
- You, your spouse, or your dependent must be enrolled in school at least half-time.
- You must make $65,000 or less as a single tax filer or under $130,000 when filing with your spouse to claim the maximum $4,000 deduction.
- You must make between $65,000 and $80,000 as a single tax filer or between $130,000 and $160,000 filing as a married couple for a reduced tax deduction.
To claim this deduction, you must attend an eligible educational institution. Per federal guidelines, this means a college, university, professional, or trade school that is eligible to receive and disburse student financial aid from the U.S. Department of Education (DOE).
While most public and private institutions with enrolled students and faculty qualify as eligible institutions, the rise of online education may preclude some courses from counting toward the tuition and fees deduction. Some unaccredited colleges require annual tuition but cannot dispense higher degrees.
If you were attending courses to improve your job skills for your employer and were not compensated adequately for the cost, these expenses also qualified for the tuition and fees deduction. If you were self-employed while the tuition and fees deduction was in effect and the coursework improved your career skills, you are also qualified to take this deduction.
When the tuition and fees deduction was still in effect, those who attended an accredited college, university, or professional school, could claim several expenses as tax-deductible. These included:
- School tuition.
- Course-related books.
- Supplies and equipment for courses, including book bags, notebooks, or laptops.
- Fees like enrollment fees, lab fees, parking fees, or activity fees.
How to File the Tuition & Fees Deduction
If you paid qualifying expenses in 2017 or before, the IRS Form 1098-T can be used to calculate the deductible amount for that tax year.
While this information can no longer be used to claim the tuition and fees deduction, schools continue to send out the form to inform students on their education expenses. When you could claim this deduction, Form 1098-T information could be applied easily on your taxes, allowing you to claim up to a $4,000 deduction.
Even if the tuition and fees deduction can not be applied, you should still keep this information on file. The IRS may need to see your education expenses during an audit of your 2017 or prior taxes. You also may be able to apply this information in the future if Congress renews the tuition and fees tax deduction and allows it to be applied retroactively to 2018 and later tax years.
Education Expenses That Do Not Qualify for the Tuition & Fees Deduction
Some expenses do not qualify as deductible under the tuition and fees tax deduction, including:
- Room and board, either on or off-campus.
- Extracurricular activities, even if they are on campus.
- Student health fees.
- Health insurance, even if it is paid through the university.
- Additional living expenses, such as food.
- Transportation, including public transit.
- Cost and fees for noncredit courses that are not required to earn your degree.
- Cost of a study abroad program.
These expenses may be covered by some financial aid, like scholarships or student loans. However, they are not tax-deductible, even if they raise your overall cost of attendance at a college or university.
The tuition and fees deduction included exceptions. You would not qualify for the tuition and fees deduction if:
- You are married but filing taxes separately.
- You are claimed as a dependent on someone else’s taxes.
- You claim either the American opportunity tax credit (AOTC) or the lifetime learning tax credit (LLC). These tax credits are still available in 2018 and later tax years.
- Your adjusted gross income is more than $80,000 as a single taxpayer or $160,000 as a married couple filing together.
- You are a nonresident alien for any part of the tax year, and you did not elect to be treated as a resident alien for tax purposes.
You Can Still Take Deductions or Tax Credits for Other Education Expenses
Although the tuition and fees deduction cannot be claimed after 2017, you can still apply the deduction to tax records from 2017 or before. You may also be able to apply the deduction retroactively for the 2018 or later tax years if Congress renews it. You can also use this information to help you file for other tax deductions or credits.
For example, if you are paying down student loans after graduation, you can use the student loan interest deduction to claim any amount of interest you paid on your loans over $600, up to $2,500. While there are income restrictions similar to those of the tuition and fees deduction, the student loan interest deduction allows graduates to reduce their tax burden, helping them continue to pay down the principal and interest on their student loans.
You may also qualify for one of two education tax credits: the American opportunity tax credit (AOTC), which helps undergraduate students for up to four years, and the lifetime learning tax credit (LLC), which is available to undergraduate students in their fifth year, graduate students, or professional students pursuing a non-bachelor’s degree.