Tuition and Fees Deduction

The Tuition and Fees Deduction could not be claimed during the same tax year that other education tax benefits, such as the American Opportunity Tax Credit (AOTC) or Lifetime Learning Tax Credit, were claimed for the same student.

Taxpayers who were eligible for more than one education tax benefit could choose to claim the Tuition and Fees Deduction because it would reduce their adjusted gross income. However, the AOTC generally provided a greater tax benefit for most individuals. 

How the Tuition and Fees Deduction worked

With the Tuition and Fees Deduction, eligible taxpayers could deduct up to $4,000 in qualified higher education expenses as an above-the-line exclusion from income. An above-the-line exclusion from income meant taxpayers could claim the deduction even if they did not itemize deductions on Schedule A. 

The Tuition and Fees Deduction was set to expire at the end of 2017, however, the expiration date was extended to December 31, 2020. Eligible taxpayers who already filed their 2018 return may file an amended return using IRS Form 1040X. Amended returns may be filed up to three years after a taxpayer’s original return was filed, or up to two years after taxes for the year were paid. Taxpayers must file a separate Form 8917 for each year they claim the Tuition and Fees Deduction after 2017. 

Who was eligible to claim the Tuition and Fees Deduction?

Taxpayers who met the following requirements could claim the Tuition and Fees Deduction for the 2019 or 2020 tax year, or for the 2018 tax year by filing an amended return:

• Taxpayers with a 2018, 2019 or 2020 annual modified adjusted gross income up to $65,000 ($130,000 if married filing jointly) could claim a maximum $4,000 deduction.
• Taxpayers with a 2018, 2019 or 2020 annual modified adjusted gross income between $65,001 and $80,000 ($130,001 and $160,000 if married filing jointly) could claim a maximum $2,000 deduction.
• The taxpayer, their spouse or a dependent child incurred qualified expenses at an eligible postsecondary education institution
• The taxpayer, spouse or dependent has received or will receive a Form 1098-T from an eligible domestic or foreign education institution. If the college isn’t required to send Form 1098-T, the taxpayer must be able to demonstrate they were enrolled at the college and paid for qualified expenses
• The taxpayer is not listed as a dependent on another person’s tax return

The Tuition and Fees Deduction was not available when:

• The taxpayer’s filing status is married filing separately

• The taxpayer claimed the AOTC or the Lifetime Learning Tax Credit during the same tax year

• The taxpayer or someone else claimed the AOTC or the Lifetime Learning Tax Credit for the same student’s qualified education expenses.

• The taxpayer was a nonresident alien during any part of the year but was not treated as a resident alien for tax purposes.

Qualified expenses for the Tuition and Fees Deduction

Qualified expenses for the Tuition and Fees Deduction generally included tuition and fees required for enrollment or attendance at an eligible educational institution.

Other qualified expenses included:

• Costs of required textbooks, supplies and equipment paid to the college or university

• Courses involving sports, games or hobbies, but only if they are part of the student’s degree program or helps the student improve or acquire job skills

• Qualified expenses purchased with student loan proceeds

• Qualified expenses paid in the current tax year for an academic period beginning within three months of the following tax year

Taxpayers could not claim the Tuition and Fees Deduction for:

• Room and board and other living expenses

• Insurance

• Medical expenses

• Transportation

• Qualified education expenses paid for with tax-free earnings from 529 plan distributions, Coverdell Education Savings Account withdrawals and qualified U.S. Savings Bond Redemptions

• Qualified expenses paid for with tax-free scholarships 

In most cases, students receive an IRS Form 1098-T from the college or university that lists amounts paid for qualified expenses in a given tax year and the amounts billed during the year. Only the expenses paid during the year qualified for the Tuition and Fees Deduction.

Coordinating the Tuition and Fees Deduction with 529 plan distributions

Like other federal education tax benefits, there is no double-dipping with the Tuition and Fees Deduction. When calculating total qualified higher education expenses for the Tuition and Fees Deduction, taxpayers had to subtract any expenses that were used to justify other income tax benefits, including:

• The tax-free earnings portion of a qualified 529 plan distribution

• Withdrawals from a Coverdell Education Savings Account (ESA)

• Qualified U.S. Savings Bond redemptions

Taxpayers who took a 529 plan distribution would receive an IRS Form 1099-Q from the 529 plan administrator. Form 1099-Q lists the total amount of the distribution, the earnings portion and the basis (contribution) portion.

Some college expenses, such as computers and room and board, were considered qualified 529 plan expenses for the AOTC but could not be used to justify the Tuition and Fees Deduction.