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This article is for informational purposes only. It is not tax advice. Please contact a qualified tax advisor with questions on how you may be eligible to deduct early college expenses.
In 2012, the IRS quietly changed it's rule on college tuition deductions. Students are no longer required to have a high school diploma or GED before they can write off a portion of their college costs.
Now, early college students, especially those in dual-enrollment programs, may qualify for a tax deduction on certain school related expenses.
See IRS Publication 970 for all the particulars to the change in the tax law. Read it over carefully, as tax laws change year-to-year.
In the meantime, here are some of the highlights:
- What is the deduction?
You can reduce your taxable income by up to $4,000.
- Are there income limits?
Modified Adjusted Gross Income is $160,000 if married filing; $80,000 if single, head of household, or qualifying widow(er). You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return.
- What can be deducted?
You can deduct tuition and fees required for enrollment or attendance at an eligible postsecondary educational institution.
- What cannot be deducted?
You can NOT deduct personal, living, room, board, transportation, insurance, or family expenses.
- Can I use this deduction with other education credits?
No. If you or anyone else on your taxes claims an American Opportunity or Lifetime Learning Credit in the same year, you cannot also claim this deduction.
- Can I use the deduction if my child dropped one of their early college courses or withdrew from the semester?
Yes. As long as tuition was not reimbursed by the school, you can still take the deduction.
- How does receiving outside financial assistance affect this deduction?
You may not be able to use this deduction if your child receives some type of tax-free funds to pay for their education. Tax-free funds would include, but are not limited to, pell grants, certain scholarships, employer provided educational assistance.
- Can I use this deduction if we used loan funds to pay for the tuition?
Yes, but some restrictions apply.
- Can I use this deduction if my ex-spouse paid a portion of the tuition or my child received a financial gift from grandparents to help pay for the tuition?
No. This deduction is only available to the person who directly paid the tuition and can claim the student as a dependent.
- Do I have to itemize my deductions with Schedule A to get this credit?
No. The deduction is made directly on your 1040.
November 18, 2019