The Tuition and Fees is available through the end of 2014. You can take the deduction if you, your spouse or any of your dependents enroll in a post-secondary school, such as a college, university or trade school, then you may be eligible to claim a deduction for your tuition and fee payments. When you claim the deduction, the IRS requires you to calculate it on IRS Form 8917 and attach it to your tax return. The deduction you report on Form 8917 is a direct adjustment to your income, so it doesn’t matter whether you itemize deductions or not.
Expenses you can deduct
When you calculate the deduction, you can only include the amounts you pay for the tuition and fees that are required for the student to enroll in courses. Before you file your tax return, the school will send you a Form 1098-T to report your annual tuition and fee payments. This is the only amount you can include on Form 8917 since the IRS doesn’t allow you to deduct the cost of books, room and board or any other expense.
The deduction is only available for the tuition payments you make for the student to attend an educational program that is eligible to participate in the federal student aid program. This requires the student to have earned either a high school diploma or GED before enrolling.
The attendance requirements are easier to satisfy than many of the other educational tax benefits since enrolling in only one course during the year is sufficient to qualify for the deduction. Even if the student withdraws from the course, you can still deduct your tuition payments if the school doesn’t issue you a refund.
Tuition deduction limitations
The IRS doesn’t let you deduct every dollar you pay in tuition, nor is it available to all taxpayers. Form 8917 puts a limit on your annual deduction, which is $4,000 for the 2014 tax year. If you pay more than this, the excess is not deductible and cannot be used in a future tax year.
In addition, if you earn too much income during the year, the IRS will not allow you to claim the deduction. The income amount can change each year, but is always based on your adjusted gross income (AGI) before reducing it by the tuition deduction. In 2014 for example, a single taxpayer whose AGI exceeds $80,000 is not eligible to claim the deduction.
When you use TurboTax to prepare your taxes, we’ll ask some simple questions about your income and education expenses. Then we’ll tell you how much you can deduct, and fill in all the right forms for you – including Form 8917.
Other Form 8917 considerations
The half-page Form 8917 only allows you to include the payments you actually make during the tax year. However, if you pay for a course that doesn’t start until next year, you can still deduct those expenses as long as it starts before April 1.
The form is only a valid attachment to an IRS Form 1040 or 1040A. So if you are eligible to file a Form 1040EZ, you should consider using a different tax form; otherwise, you will forfeit your tuition deduction. Don’t worry – if you’re using TurboTax, we’ll figure out which forms you need to file to get all of the deductions and credits you deserve.