The federal tuition and fees deduction allowed taxpayers to subtract the cost of college tuition and other education-related fees and expenses from their taxable income "above the line." These deductions, along with any other similar adjustments to your income, determine your all-important adjusted gross income (AGI).
The tuition and fees deduction was in effect through the 2020 tax year but has since expired. However, you can still claim the deduction for past years if you did not originally claim it when you filed. Here's what you need to know about this deduction and your eligibility.
The Tuition and Fees Deduction Expired in 2020
The tuition and fees deduction was on unsteady footing after the passing of the Tax Cuts and Jobs Act (TCJA) in 2017. That legislation ended this tax break. However, Congress revived the deduction the next year with the Bipartisan Budget Act of 2018 (BBA). The BBA retroactively renewed it for the 2017 tax year, but the deduction was set to expire at the start of the 2019 tax year.
After that, the Taxpayer Certainty and Disaster Relief Act of 2019 reinstated the deduction through the 2020 tax year. The deduction expired after the end of the 2020 tax year—assuming no additional legislation revives it again.
Where To Report the Tuition and Fees Deduction
Another impact of the TCJA was that the IRS redesigned Form 1040.
These adjustments to income are particularly advantageous because you don't have to itemize to claim them. Itemizing became less common after the TCJA nearly doubled the standard deduction.
You could claim tuition and fees deductions and itemize your taxes, or you could claim the tuition and fees deductions and take the standard deduction. Adjustments to income determine your AGI, and that's important because several other tax breaks and your overall tax bracket depend on your AGI. Some tax advantages are phased out or eliminated as your AGI grows.
Finding Information on Form 1098-T
If you had eligible expenses, you should have received Form 1098-T from the education institution that applies to the deduction.
To claim the deduction, you had to use the amount that appeared in box 1—this is what you actually paid. It can be different from the number that appeared in box 2. For instance, you might have paid in advance for expenses incurred in the first three months of the next calendar year, so those extra payments would be reflected in box 1 but not box 2. You needed to enter the information on IRS Form 8917 and on your Form 1040 and submit Form 8917 with your tax return.
Schools also report your qualifying expenses to the IRS on Form 1098-T.
Qualifying Rules for the Deduction
This deduction was available to taxpayers who paid tuition and other required fees for attending college or another post-secondary school. Parents could deduct tuition for their child as long as the student was their dependent. Students could also claim this deduction for their own education expenses. Those who are married and file jointly could claim this deduction if one of the spouses attended school.
The tuition and fees adjustment to income could not be claimed by married couples who filed separate tax returns, by taxpayers who could be claimed as someone else's dependent, or by nonresident aliens who had not elected to be taxed as resident aliens.
Expenses related to student activities and sports generally weren't deductible. Nor were fees for room and board, health insurance, transportation, or courses that aren't required to achieve a degree. However, some costs associated with activities and athletics were deductible if required by the school or directly tied to a student's chosen career path.
The maximum amount you could claim for the tuition and fees adjustment to income was $4,000 per year. The deduction was further limited by income ranges based on your modified adjusted gross incomes (MAGIs). High-income individuals may have found that they didn't qualify for this deduction. Check the chart below for a breakdown of the thresholds in the 2020 tax year.
|2020 Tuition and Fees Deduction Thresholds|
|$65,000 or less ($130,000 if married)||$4,000|
|$80,000 or less ($160,000 if married)||$2,000|
|More than $80,000 ($160,000 if married)||$0|
Choosing Educational Tax Advantages
There are two other major tax advantages related to higher education: the American Opportunity Credit and the Lifetime Learning Credit, both of which are still available. You need to be careful about which one you claim—they each have their benefits and drawbacks, and you can't claim multiple benefits for the same expense.
You might want to prepare your return multiple ways to see which credit or deduction is most advantageous for you.
Filing an Amended Return
You can file an amended return up to three years after you filed your original return, or up to two years after you paid the tax due for that year, whichever is later. If you missed this deduction in 2018, 2019, or 2020 but were eligible, you can now go back and take advantage of it. These amendments can be made by filing Form 1040-X.
Frequently Asked Questions (FAQs)
What education expenses are tax deductible?
You can still claim tax credits for education expenses through the Lifetime Learning Credit (LLC) or the American Opportunity Tax Credit (AOTC). The LLC is worth up to $2,000 for each of the four years of education, while the AOTC is worth up to $2,500 and has no limit on the number of years you can claim it. Both credits can apply toward tuition and fees, while the AOTC can also apply toward some course materials. For a full comparison of qualifications, see the IRS' comparison table. You can only take one credit per tax year.
How do you deduct education expenses?
The previous tuition and fees deduction, which expired in 2020, was reported on IRS Form 8917 and Schedule 1 of Form 1040. For the AOTC and LLC, you'll need to use Form 8863 and Schedule 3.