The tuition and fees deduction can reduce the amount of your taxable income by up to $4,000. This deduction is taken as an adjustment to income, which means that you can claim the deduction even if you don’t itemize deductions on Schedule A (Form 1040).
Since the tuition and fees deduction covers the same expenses as the American Opportunity Credit and Lifetime Learning Credit, you can either take the deduction or claim 1 of the education tax credits -- you can’t take the deduction and a credit.
Generally, you can claim the tuition and fees deduction if you meet all the following requirements:
You pay qualified education expenses of higher education. Qualified expenses are tuition and fees, including student-activity fees and expenses for course-related books, supplies, and equipment only if the expenses must be paid to the institution as a condition of enrollment or attendance.
Books, supplies, and equipment purchased elsewhere don’t qualify for this deduction. For example, you can’t claim expenses for books that you purchase at a big-chain bookstore.
You pay the education expenses for an eligible student. An eligible student is one who is enrolled in 1 or more courses at an eligible educational institution. For purposes of this deduction, an eligible student is yourself, your spouse, or someone you claim as a dependent on your tax return.
Only the person who claims the dependency exemption and pays the expenses can claim the deduction. This means that the deduction is available to parents who pay for their child’s education, as well as students who pay for their own education and live independently (can’t be claimed as a dependent). If the parent pays expenses but isn’t eligible to claim the student as a dependent, then the amount paid by the parent may be used by the student to claim the deduction on his or her return.
Your income must fall within the income limits set for this deduction. For 2010, the deduction begins to phaseout at $65,000 for single taxpayers and $130,000 for married taxpayers filing a joint return and will be completely phased out if your modified AGI is $80,000 if you’re filing a single return, and $160,000 if you’re filing a joint return.
You can’t claim this deduction if any of the following situations apply:
You and your spouse file separate returns.
Another person can claim you as a dependent. You cannot take the deduction even if the other person does not actually claim you as a dependent.
You or your spouse were a nonresident alien for any part of the year and the nonresident alien did not elect to be treated as a resident alien for tax purposes.
You claim an American opportunity, Hope, or lifetime learning credit in 2010 with respect to the expenses of the student for whom the qualified education expenses were paid.
To learn more, check out the following resources:
Chapter 6 of IRS Publication 970: Tax Benefits for Education
Form 1040 instructions