Video: What Educational Expenses Are Tax Deductible?
Hello, I'm Jill from TurboTax with some information for taxpayers who pay educational expenses.
Did you know that the federal government is a big supporter of higher education, and encourages you to enroll in school by offering a range of educational tax deductions? Therefore, if you are a student, or you claim a dependent who is, you may want to evaluate your eligibility to deduct your school expenses and student loan interest.
The tuition and fees deduction can reduce your taxable income by up to $4,000 for the tuition and fees you pay for yourself, a spouse or a dependent to enroll at a postsecondary institution, such as a college, university and even a vocational school. If you plan on claiming the deduction, remember that the IRS requires you to file a Form 8917 with your tax return, which means you can't file a 1040-EZ. You must use a 1040A or standard 1040 form.
If you take courses because your employer or a government agency requires it, or the courses improve skills that you can use at work, you can also consider claiming the work-related education deduction, but only if you itemize your deductions on Schedule A. You can never take the tuition and fees deduction and a work-related education deduction for the same expenses, so it's important that you evaluate which deduction will provide the most tax savings. TurboTax can help with this.
Generally speaking, as your income increases, the amount you can deduct for tuition and fees decreases. This threshold can change from year to year, based on the latest tax laws. How big a deduction you're eligible for depends on your modified adjusted gross income, which is just your adjusted gross income before claiming the tuition and fees deduction. (Again, TurboTax will figure this out for you based on your answers to simple questions about your income and expenses.)
When taking the work-related education deduction on Schedule A, however, you must report your education expenses with the miscellaneous deductions that are subject to the 2-percent adjusted gross income limitation. This means that only the amount that exceeds 2 percent of your AGI is deductible. You can claim either deduction regardless of whether you use personal funds or a student loan to finance your education. And even better: you can deduct some of the interest when you begin repaying the loan.
When you file with TurboTax, we'll ask you simple questions about your income and your education expenses, recommend the choices that get you the biggest deductions, and fill out all the appropriate forms for you.