Form 8917: Tuition and Fees Deduction: What it is, How it Works

Deductible expenses – As the name implies, you can deduct tuition and fees from your taxes. Specifically, you can deduct tuition and fees required for enrollment or attendance at an eligible postsecondary educational institution. However, you can’t deduct personal, living, or family expenses, such as room and board. While federal student loan payments are set to resume in October, some graduates might have student loans forgiven through other programs. So, it’s good to know whether your forgiven student loan amounts are taxable or tax-free. You might be able to cash in savings bonds without paying tax on the interest earned.

  • Qualified expenses for the Tuition and Fees Deduction generally include tuition and fees required for enrollment or attendance at an eligible educational institution.
  • Massachusetts also conforms to the federal exclusion of forgiven student loans under Code § 108(f)(5) in effect for the taxable year, which is set to expire after tax year 2025.
  • Education assistance is only tax-free if the funds are used to pay for qualified education expenses.
  • For now, it’s not available for the 2021 tax year unless Congress votes to extend it.

Just answer simple questions, and we’ll guide you through filing your taxes with confidence. Katelyn has more than 6 years’ experience working in tax and finance. While she specializes in tax content, Katelyn has also written for digital publications on topics including insurance, retirement and financial planning and has had financial advice commissioned by national print publications. She believes that knowledge is the key to success and enjoys helping others reach their goals by providing content that educates and informs. The savings bonds must be series EE bonds issued after 1989 or series I bonds. The bonds must also be issued either in your name (as the sole owner) or in the name of you and your spouse (as co-owners).

How to File Form 8917: Tuition and Fees Deduction

The education tax credits are based on the amount of qualified tuition and fees actually paid by the taxpayer or the student claimed as a dependent on the taxpayer’s tax return. The amount paid, however, would include amounts borrowed by the student (e.g., Perkins student loans and Federal Direct student loans) to pay for qualified tuition and fees. IRS regulations provide rules for allocating scholarship, fellowship, and financial aid grants among qualified and non-qualified expenses. Generally, a non-taxable scholarship, fellowship, or financial aid grant reduces the amount of qualified tuition and related expenses that a taxpayer may otherwise include when claiming education credit. Taxpayers may deduct qualified higher education expenses from federal
taxable income through tax year 2016.

And Fees Deduction

For the AOTC and LLC, you’ll need to use Form 8863 and Schedule 3. You might want to prepare your return multiple ways to see which credit or deduction is most advantageous for you. If you can claim your child as a dependent and he already filed his return as a non-dependent, he’ll need to file an amended return to show that he’s a dependent. The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice.

Tuition and Fees Deduction

However, if a student withdraws but the paid qualified educational expenses were not refunded, then a deduction can still be claimed. To get the full $2,000 LLC in 2023, your MAGI can’t be higher than $80,000 if you’re single or $160,000 if you’re filing a joint tax return. You’re ineligible for the tax credit if your filing status is married filing separately, you were a nonresident alien at some point during the year and/or someone else is claiming you (or the student you paid for) as a dependent. There is a phaseout or income limit for those who can claim the Student Loan Interest Deduction, which is based on your adjusted income. In 2022, the deduction will be unavailable to you if your modified AGI is higher than $85,000 for single, head of household, and qualifying widow filers; the limit is $140,000 if Married Filing Jointly. The phaseouts are for an AGI of $70,000-$85,000 for most filers and $145,000-$175,000 for joint returns; when the upper limit is met, you are ineligible for the deduction.

You also cannot deduct education expenses if you used the expenses to calculate another credit (like the AOTC or Lifetime Learning Credit). This deduction does not impact the calculation of No Tax Status and the Limited Income Credit, as it is treated as a deduction to arrive at Massachusetts taxable income. The deduction is not allowed if the taxpayer claims the deduction allowed under Code § 221 for the same interest payments. Massachusetts adopts the federal deduction for student loan interest under Code § 221 in effect on January 1, 2022.

Military Benefits Updates

You’re ineligible for the tuition and fees deduction if you and your spouse are filing separate tax returns or you were a nonresident alien for part of the tax year. You can’t claim the tax break if your income is higher than a certain threshold either. If your modified adjusted gross income is above $80,000 (or above $160,000 for joint filers), you can’t qualify for the deduction. That means you don’t have to itemize deductions in order to take advantage of it.

For example, if you qualified for a refund, this credit could increase the amount you’d receive by up to $1,000. That’s why the American opportunity credit is typically the best education tax break for students and their families. Taxpayers who are eligible for more than one education tax benefit may choose to claim the Tuition and Fees Deduction because it will reduce their adjusted gross income. However, the AOTC generally provides a greater tax benefit for most individuals. The Tuition and Fees Deduction was extended through the end of 2020. It allows you to deduct up to $4,000 from your income for qualifying tuition expenses paid for you, your spouse, or your dependents.

Education Tax Credits and Deductions You Can Claim for 2022

Starting in 2024, up to $35,000 (lifetime limit) can, under a provision in the SECURE 2.0 Act,  be rolled over from a 529 plan to a Roth IRA. So, your child or grandchild might be able to eventually benefit from your 529 contributions, even if they don’t use the funds for education. However, there are rules governing these 529-to-Roth rollovers, one of which is that you had to have to 529 plan for at least 15 years. Working with an adviser may come with potential downsides such as payment of fees (which will reduce returns).

What are deductions?

A deduction reduces the amount of a taxpayer's income that's subject to tax, generally reducing the amount of tax the individual may have to pay.

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