Figuring the Deduction(p41)

The maximum tuition and fees deduction in 2011 is $4,000, $2,000, or $0, depending on the amount of your MAGI. See Effect of the Amount of Your Income on the Amount of Your Deduction, later.

To help you figure your tuition and fees deduction, you should receive Form 1098-T (see Form 1098-T in chapter 3, Lifetime Learning Credit, for a completed example of Form 1098-T). 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. An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. However, the amount in boxes 1 and 2 of Form 1098-T might be different than what you actually paid. When figuring the deduction, use only the amounts you paid in 2011 for qualified education expenses.

In addition, your Form 1098-T should give you other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements or refunds, and whether you were enrolled at least half-time or were a graduate student.

The eligible educational institution may ask for a completed Form W-9S or similar statement to obtain the student's name, address, and taxpayer identification number.

If your MAGI is not more than $65,000 ($130,000 if you are married filing jointly), your maximum tuition and fees deduction is $4,000. If your MAGI is larger than $65,000 ($130,000 if you are married filing jointly), but is not more than $80,000 ($160,000 if you are married filing jointly), your maximum deduction is $2,000. No tuition and fees deduction is allowed if your MAGI is larger than $80,000 ($160,000 if you are married filing jointly).

For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return before subtracting any deduction for tuition and fees. However, as discussed below, there may be other modifications.

If you file Form 1040A, your MAGI is the AGI on line 22 of that form, figured without taking into account any amount on line 19 (Tuition and fees).

If you file Form 1040, your MAGI is the AGI on line 38 of that form, figured without taking into account any amount on line 34 (Tuition and fees) or line 35 (Domestic production activities deduction), and modified by adding back any:

1. Foreign earned income exclusion,
2. Foreign housing exclusion,
3. Foreign housing deduction,
4. Exclusion of income by bona fide residents of American Samoa, and
5. Exclusion of income by bona fide residents of Puerto Rico.

Table 6-2 shows how the amount of your MAGI can affect your tuition and fees deduction.

You can use Worksheet 6-1. MAGI for the Tuition and Fees Deduction, later, to figure your MAGI.