DEDUCTING COLLEGE TUITION PART TWO
January 13, 2021 - Douglas Myser
Deducting college tuition part two. This is the second part of a two part series on ways to deduct college tuition. Some changes due to recent tax laws. Qualified expenses may include nonacademic fees, such as student activity fees and athletic fees, but only if they must be paid directly to the college as a condition for enrollment or attendance. Qualified expenses are limited to courses of instruction to "acquire or improve job skills." Expenses paid for academic terms that begin in the first three months of the next tax year can be counted as though they were paid during the current tax year. The tax credit can be claimed for an unlimited number of years. The LLTC is subject to the following eligibility restrictions: The student is not required to be seeking a degree or certificate, so the tax credit can be used for continuing education. The student must be enrolled at a college or university that is eligible for Title 4 federal student aid. The student can be enrolled on a part time basis. The student is eligible even if they were convicted of a federal or state felony drug offense for the sale or possession of a controlled substance. Deducting college tuition part two.
The Lifetime Learning Tax Credit is often claimed by graduate or professional school students who are no longer eligible for the American Opportunity Tax Credit. The income phaseouts in 2021 are $59,000 to $69000 (single) and $119000 to $139000 (married filing jointly). Taxpayers who file as married filing separately are not eligible. The income phaseouts are adjusted annually for inflation. About 2.8 million taxpayers claimed the Lifetime Learning Tax Credit in 2018. Tuition and Fees Deduction. The Tuition and Fees Deduction is an above the line exclusion for income for up to $4000 in tuition and fees. The deduction is reduced to $2000 for taxpayers with income within the income phaseout ranges. Course material costs can also qualify if paid directly to the college and if they are required for enrollment or attendance. Expenses paid for academic terms that begin in the first three months of the next tax year can be counted as though they were paid during the current tax year.