Publication 17 - Your Federal Income Tax (For Individuals)

Publication 17

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You may be able to deduct qualified education expenses paid during the year for yourself, your spouse, or your dependent(s). 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. The qualified expenses must be for higher education, as explained later under What Expenses Qualify.

The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000.

Table 19-2 summarizes the features of the tuition and fees deduction.

You may be able to take a credit for your education expenses instead of a deduction. You can choose the one that will give you the lower tax. See chapter 34, Education Credits, for details about the credits.

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The following rules will help you determine if you can claim the tuition and fees deduction.

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Who Can Claim the Deduction

Generally, you can claim the tuition and fees deduction if all three of the following requirements are met.

You paid qualified education expenses of higher education.
You paid the education expenses for an eligible student.
The eligible student is yourself, your spouse, or your dependent for whom you claim an exemption (defined in chapter 3) on your tax return.

Qualified education expenses are defined under What Expenses Qualify. Eligible students are defined later under Who Is an Eligible Student.

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Who Cannot Claim the Deduction

You cannot claim the tuition and fees deduction if any of the following apply.

Your filing status is married filing separately.
Another person can claim an exemption for you as a dependent on his or her tax return. You cannot take the deduction even if the other person does not actually claim that exemption.
Your modified adjusted gross income (MAGI) is more than $80,000 ($160,000 if filing a joint return).
You (or your spouse) were a nonresident alien for any part of 2011 and the nonresident alien did not elect to be treated as a resident alien for tax purposes. More information on nonresident aliens can be found in Publication 519, U.S. Tax Guide for Aliens.
You or anyone else claims an American opportunity or lifetime learning credit in 2011 with respect to expenses of the student for whom the qualified education expenses were paid.

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Table 19-2. Tuition and Fees Deduction at a Glance
Do not rely on this table alone. Refer to the text for more details.

Question		Answer
What is the maximum benefit?		You can reduce your income subject to tax by up to $4,000.
Where is the deduction taken?		As an adjustment to income on Form 1040, line 34, or Form 1040A, line 19.
For whom must the expenses be paid?		A student enrolled in an eligible educational institution who is either: • you, • your spouse, or • your dependent for whom you claim an exemption.
What tuition and fees are deductible?		Tuition and fees required for enrollment or attendance at an eligible postsecondary educational institution, but not including personal, living, or family expenses, such as room and board.

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The tuition and fees deduction is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Generally, the deduction is allowed for qualified education expenses paid in 2011 in connection with enrollment at an institution of higher education during 2011 or for an academic period (defined earlier under Student Loan Interest Deduction) beginning in 2011 or in the first 3 months of 2012.

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Payments with Borrowed Funds

You can claim a tuition and fees deduction for qualified education expenses paid with the proceeds of a loan. Use the expenses to figure the deduction for the year in which the expenses are paid, not the year in which the loan is repaid. Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account.

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Student Withdraws from class(es)

You can claim a tuition and fees deduction for qualified education expenses not refunded when a student withdraws.

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Qualified Education Expenses

For purposes of the tuition and fees deduction, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution.

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Postsecondary Educational Institution

An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education. It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. The educational institution should be able to tell you if it is an eligible educational institution.

Certain educational institutions located outside the United States also participate in the U.S. Department of Education's Federal Student Aid (FSA) programs.

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Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance.

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No Double Benefit Allowed

You cannot do any of the following.

Deduct qualified education expenses you deduct under any other provision of the law, for example, as a business expense.
Deduct qualified education expenses for a student on your income tax return if you or anyone else claims an American opportunity or lifetime learning credit for that same student for the same year.
Deduct qualified education expenses that have been used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or a qualified tuition program (QTP). For a QTP, this applies only to the amount of tax-free earnings that were distributed, not to the recovery of contributions to the program. See Figuring the Taxable Portion of a Distribution in chapter 7 (Coverdell ESA) and chapter 8 (QTP) of Publication 970.
Deduct qualified education expenses that have been paid with tax-free interest on U.S. savings bonds (Form 8815). See Figuring the Tax-Free Amount in chapter 10 of Publication 970.
Deduct qualified education expenses that have been paid with tax-free educational assistance such as a scholarship, grant, or employer-provided educational assistance. See the following section on Adjustments to qualified education expenses.

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Adjustments to Qualified Education Expenses

If you pay qualified education expenses with certain tax-free funds, you cannot claim a deduction for those amounts. You must reduce the qualified education expenses by the amount of any tax-free educational assistance and refunds you received.

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This includes:

The tax-free part of scholarships and fellowships (see chapter 1 of Publication 970),
Pell grants (see chapter 1 of Publication 970),
Employer-provided educational assistance (see chapter 11 of Publication 970),
Veterans' educational assistance (see chapter 1 of Publication 970), and
Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance.

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Qualified education expenses do not include expenses for which you, or someone else who paid qualified education expenses on behalf of a student, receive a refund. (For information on expenses paid by a dependent student or third party, see Who Can Claim a Dependent's Expenses, later.)

If a refund of expenses paid in 2011 is received in 2011, simply reduce the amount of the expenses paid by the amount of the refund received. If the refund is received after 2011, see When Must the Deduction Be Repaid (Recaptured), in chapter 6 of Publication 970.

You are considered to receive a refund of expenses when an eligible educational institution refunds loan proceeds to the lender on behalf of the borrower. Follow the above instructions according to when you are considered to receive the refund.

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Amounts That Do Not Reduce Qualified Education Expenses

Do not reduce qualified education expenses by amounts paid with funds the student receives as:

Payment for services, such as wages,
A loan,
A gift,
An inheritance, or
A withdrawal from the student's personal savings.

Do not reduce the qualified education expenses by any scholarship or fellowship reported as income on the student's tax return in the following situations.

The use of the money is restricted to costs of attendance (such as room and board) other than qualified education expenses.
The use of the money is not restricted and is used to pay education expenses that are not qualified (such as room and board).

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Expenses That Do Not Qualify

Qualified education expenses do not include amounts paid for:

Insurance,
Medical expenses (including student health fees),
Room and board,
Transportation, or
Similar personal, living, or family expenses.

This is true even if the amount must be paid to the institution as a condition of enrollment or attendance.

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Sports, Games, Hobbies, and Noncredit Courses

Qualified education expenses generally do not include expenses that relate to any course of instruction or other education that involves sports, games or hobbies, or any noncredit course. However, if the course of instruction or other education is part of the student's degree program, these expenses can qualify.

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Comprehensive or Bundled Fees

Some eligible educational institutions combine all of their fees for an academic period into one amount. If you do not receive, or do not have access to, an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed above, contact the institution. The institution is required to make this allocation and provide you with the amount you paid (or were billed) for qualified education expenses on Form 1098-T, Tuition Statement. See How Do You Figure the Deduction, later, for more information about Form 1098-T.

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Who is an Eligible Student

For purposes of the tuition and fees deduction, an eligible student is a student who is enrolled in one or more courses at an eligible educational institution (defined earlier). The student must have either a high school diploma or a General Educational Development (GED) credential.

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Who Can Claim a Dependent's Expenses

Generally, in order to claim the tuition and fees deduction for qualified education expenses for a dependent, you must:

Have paid the expenses, and
Claim an exemption for the student as a dependent.

Table 19-3 summarizes who can claim the deduction.

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The maximum tuition and fees deduction in 2011 is $4,000, $2,000, or $0, depending on the amount of your MAGI. For details on figuring your MAGI, see chapter 6 of Publication 970.

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How Do You Figure the Deduction

Figure the deduction using Form 8917.

To help you figure your tuition and fees deduction, you should receive Form 1098-T, Tuition Statement. Generally, an eligible educational institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to each enrolled student by January 31, 2012.

To claim the deduction, enter the allowable amount on Form 1040, line 34, or Form 1040A, line 19, and attach your completed Form 8917.

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Table 19-3. Who Can Claim a Dependent's Expenses
Do not rely on this table alone. See Who Can Claim a Dependent's Expenses in chapter 6 of Publication 970.

IF your dependent is an eligible student and you...	AND...	THEN...
claim an exemption for your dependent	you paid all qualified education expenses for your dependent	only you can deduct the qualified education expenses that you paid. Your dependent cannot take a deduction.
claim an exemption for your dependent	your dependent paid all qualified education expenses	no one is allowed to take a deduction.
do not claim an exemption for your dependent, but are eligible to	you paid all qualified education expenses	no one is allowed to take a deduction.
do not claim an exemption for your dependent, but are eligible to	your dependent paid all qualified education expenses	no one is allowed to take a deduction.
are not eligible to claim an exemption for your dependent	you paid all qualified education expenses	only your dependent can deduct the amount you paid. The amount you paid is treated as a gift to your dependent.
are not eligible to claim an exemption for your dependent	your dependent paid all qualified education expenses	only your dependent can take a deduction.

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Tuition and Fees Deduction(p139)

Can You Claim the Deduction(p140)

Who Can Claim the Deduction(p140)

Who Cannot Claim the Deduction(p140)

What Expenses Qualify(p140)

Payments with borrowed funds.(p140)

Student withdraws from class(es).(p140)

Qualified Education Expenses(p140)

Eligible educational institution.(p140)

Related expenses.(p140)

No Double Benefit Allowed(p140)

Adjustments to qualified education expenses.(p140)

Amounts that do not reduce qualified education expenses.(p140)

Expenses That Do Not Qualify(p140)

Sports, games, hobbies, and noncredit courses.(p141)

Comprehensive or bundled fees.(p141)

Who Is an Eligible Student(p141)

Who Can Claim a Dependent's Expenses(p141)

How Much Can You Deduct(p141)

How Do You Figure the Deduction(p141)