What Continuing Education Expenses Should I Pay Before 2018

College Education and Tax Deductions

If you, as a student, attend any accredited K-12 school, university, community college, trade or vocational school, or adult/continuing education class, you will generally qualify for some or all of the education tax credits or deductions. The degree you are pursuing should not affect whether you qualify or not (e.g. Bachelor's Degree, a Master's Degree, a certificate, or even a PhD for your post-secondary educational institution).

If you claim a student as a dependent on your 2021 Tax Return, note that you can claim only one type of education credit per student dependent on your federal tax return each tax year. If more than one student dependent qualifies for a credit in the same year, you can claim a different credit for each student. Utilize the eFile.com DEPENDucator to determine who qualifies as a dependent or the CHILDucator for the Child Tax Credit.

To figure the total tax credit or tax deduction amount for an eligible student, you may be able to include qualified expenses, such as tuition, fees, books, supplies, and other required course materials, but not room and board. These credits are subject to income limitations, so your amount may be reduced or eliminated based on your adjusted gross income, or AGI. When you prepare your return on eFile.com, simply enter the education expenses and the app will prepare the forms needed to claim either the education deduction or credit on your tax return.

Important: The Tuition and Fees Tax Deduction was brought back by Congress in late 2019 for Tax Years 2018, 2019, and 2020. It was available for several years due to extensions that Congress has passed. However for 2021 returns, it has been repealed and thus is no longer available. To help ease the transition, the Lifetime Learning Credit amounts were increased for 2021 returns. To claim the Tuition and Fees tax deduction on your 2019, 2018, and 2020 Returns, you will need to file a tax amendment and include Form 8917.

The Student Loan Interest deduction is still in effect, plus the American Opportunity Tax Credit and Lifetime Learning Credit.

The eFile.com Tax App makes it easy for you to claim education credits and tax deductions.

Qualified Expenses for Student Tax Deductions/Credits 2021

Student Expenses in 2021

Student Loan Interest Deduction

American Opportunity Credit

Lifetime Learning Credit

Tuition and fees

See below

Yes

Yes

Books and Supplies

No

Yes

Yes

Computers and related equipment and services (i.e. internet)

No

Yes

Yes

Transportation costs

No

No

No

Health insurance

No

No

No

Student loan interest payments

Yes

No

No

Student Loan Interest Deduction

If you have started to pay back your student loans, you may be able to reduce your taxable income by up to $2,500 of the student loan interest you have paid for you, your spouse, or your dependent. This also includes the one-time "loan origination fee" charged by your lender.

The Student Loan Interest Deduction is an above-the-line deduction, which means that you do not need to itemize deductions in order to claim it. Above the line deductions reduce your taxable income and ultimately lowers your adjusted gross income. To qualify for the deduction, the student loan on which you paid interest must be a commercial loan taken out exclusively for the purposes of paying for education. The loan may only apply to a student who is enrolled at least half-time in a degree program. The student must be you, your spouse, or your dependent.

Student Loan Interest Phaseout Adjusted Gross Incomes: In 2021, the deduction will be unavailable to you if your modified AGI is higher than $85,000 for Single, Head of Household, and Qualifying Widower filers and $140,000 if Married Filing Jointly. For 2022, the phaseouts will be an AGI of $70,000 - $85,000 for most filers and $145,000 - $175,000 for joint returns. Married filing separately taxpayers are ineligible for the deduction.

Qualified expenses for the Student Loan Interest Deduction are the total costs of attending an eligible educational institution (including graduate school). An eligible educational institution is a school offering higher education beyond high school. It is any college, university, trade school, or other post secondary educational institution eligible to participate in a student aid program run by the U.S. Department of Education. This includes most accredited public, nonprofit, and privately-owned–for-profit postsecondary institutions. If you are not sure if your school qualifies, you can ask or see if your school is listed here.

These costs include:

• Tuition and fees
• Books, equipment, and supplies
• Room and board
• Other necessary expenses, such as transportation

Room and board costs only qualify for the deduction if they are not more than the greater of:

• The allowance for room and board (as determined by the eligible educational institution) that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student, OR
• The actual amount charged if the student is residing in housing owned or operated by the educational institution

Tuition and Fees Deduction

The Tuition and Fees Tax Deduction was brought back by Congress in late 2019 for Tax Years 2018, 2019, and 2020. It was available for several years due to extensions that Congress has passed. However for 2021 returns, it has been repealed and thus is no longer available. To help ease the transition, the Lifetime Learning Credit amounts were increased. To claim the Tuition and Fee tax deduction on your 2019, 2018, and 2020 Returns, you will need to file a tax amendment and include Form 8917.

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For your 2017 and earlier returns - plus for Tax Years 2018, 2019, and 2020 - you can claim a tax deduction of up to $4,000 depending on your Modified Adjusted Gross Income (MAGI) and filing status (the Married Filing Separate status does not qualify) for qualifying tuition and fees you paid for you, your spouse, or a dependent. You can deduct any qualified expenses up to $4,000, even if you paid the tuition and fees with a loan. If you take the Tuition and Fees Deduction and you have also paid interest on student loans, you may be able to take the Student Loan Interest Deduction as well.

If you are filing an amendment to claim the Tuition and Fees Deduction on your 2020 or earlier return, here's how much the student tuition deduction could be worth:

$4,000, if your Modified Adjusted Gross Income or MAGI was under $60,000 with the filing status single or under $130,000 for married filing jointly couples.
$2,000 for single filers with a MAGI between $60,000 and $80,000. For the married filing jointly filing status with a MAGI between $130,000 and $160,000.
$0 tax deduction for single filers with a MAGI over $80,000 or over $160,000 for married filing jointly couples.

To qualify, the student for whom you paid tuition and fees must be you, your spouse, or your dependent. The student need only be enrolled part-time.

You will NOT qualify for the Tuition and Fees Deduction if any of the following are true:

• Your filing status is married filing separately
• You may be claimed as a dependent on another tax return (whether or not you are actually claimed)
• You are claiming either the Lifetime Learning Credit or The American Opportunity Credit
• Your adjusted gross income is higher than $80,000 ($160,000 if married filing jointly)
• You were a nonresident alien for any part of the Tax Year and did not elect to be treated as a resident alien for tax purposes.

For 2020 the value of the Tuition and Fees Deduction began to phase out at AGIs of $60,000 ($130,000 if married filing jointly). If your adjusted gross income is $60,000 or less ($130,000 or less if married filing jointly), then you will qualify for the full $4,000 deduction. If your AGI is from $60,001 to $80,000 ($130,001 to $160,000 if married filing jointly), the maximum amount of your Tuition and Fees Deduction will be reduced. If your AGI is above $80,000/$160,000, the deduction will not be available to you.

How To Claim Education Deductions and Credits on eFile.com

During the tax interview and after you have indicated that you have education expenses, on the Education screen, there are a series of questions you will be asked. After you have provided the answers and information, the tax app will highlight for you which Education credit you qualify for and is best for you - the American Opportunity Credit or Lifetime Learning Credit. If you have student loan interest to claim, you can provide that information on the Student Loan Adjustment form.

How Else Can Students Save Money on Taxes?

Besides claiming tax credits (which reduce the amount of income tax you owe) and tax deductions (which reduce the amount of your income that is taxable), there are two other major ways students can save money on taxes:

• Exclusions: Tax exclusions are parts of your income that do not have to be included in your gross income on your tax return. The most relevant forms of non-taxable income for students are scholarship funds and fellowship grants. Learn more about excluding scholarship and grant income.
• Savings Plans: There are two special kinds of savings accounts which provide great tax benefits to students: Coverdell Educational Savings Accounts (Coverdell ESA's) and Qualified Tuition Programs, which are also known as 529 College Savings Plans.
• Financial Aid: When applying for financial aid, your college or university may ask you to provide old tax tax returns--either yours or your parents. To access an old tax return, you might need to obtain a copy or free transcript of a tax return from the IRS. A transcript of your tax return provides W-2 information along with the basic information that was filed with the tax return, including marital status, adjusted gross income, taxable income, and most line items from the tax return. The tax return transcript can be sent directly to the institution asking for it.

College Student Tax Credits for Tax Year 2021

• American Opportunity Credit
• Lifetime Learning Credit.

Education Savings Plans for College and K-12 Students

• Qualified Tuition Programs (QTPs) (529 Plans): College
• Coverdell Educational Savings Accounts (ESA): K-12.

Related Student Tax Topics

• Review our student tax guide.
• Learn about valuable student tax credits.
• Find out how to save money with tax-free student savings accounts.
• Learn about other tax deductions and tax credits for which you may qualify to claim on your tax return.
• Use our Free Tax Tools to help calculate taxes or determine eligibility for certain credits.
• Lived abroad for schooling? Learn about tax-related topics for living, working in a foreign country.
• How to save money when living abroad.
• If you have a foster child in school, learn additional ways to save on taxes.

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Source: https://www.efile.com/student-education-tax-deductions/

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