NOTE: The tuition and fees deduction expired at the end of tax year 2017. See if you qualify for the American Opportunity Credit or the Lifetime Learning Credit, either of which could reduce your tax bill dollar-for-dollar. IRS Publication 970, "Tax Benefits for Education," contains details on these credits and how they may be claimed.
If you are paying college expenses for yourself or for one of your dependents, you may be able to deduct the tuition and fees on your federal tax return. Qualified tuition and fee expenses may be partially deducted as long as the expenses are not paid by others through programs such as scholarships, grants, or employer plans, and they are not paid using tax-free funds like savings bonds.
The student in question must be enrolled in at least one course at an eligible educational institution, and deductible fees must be those required for college attendance. Expenses for books and mandatory student-activity fees may be deducted, while other expenses such as room and board, medical expenses, and insurance are not. See IRS Publication 970, "Tax Benefits for Education," for details.
The tuition and fees deduction can reduce your taxable income by up to $4,000, as long as you meet the following criteria:
The tuition and fees deduction has one other benefit in that it is an above-the-line deduction. You can claim it whether or not you itemize, and it reduces your taxable income.
Be sure to keep the timing straight on payments. The time of payment dictates the deduction year. A payment made in December of 2017 that applies to the first semester classes of 2018 still counts as a 2017 deduction, but if the payment for that same class was made in early January of 2018, it applies to the 2018 tax year. Time your payments when they benefit you the most.
In most recent years, Congress had allowed the tuition and fees tax deduction to expire only to revive it at the last minute. This year was no different, with the 2018 Bipartisan Budget Act retroactivelyreinstating it for the 2017 tax year. That may be as close to permanent as this tax deduction will get. If you qualified in the last tax year, consider taking advantage of the tuition and fees deduction while you still can.
Failing to pay your taxes or a penalty you owe could negatively impact your credit score. You can check your credit score and read your credit report for free within minutes by joining MoneyTips.
Originally Posted at: https://www.moneytips.com/education-tax-savings
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