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Publication 970

When Must the Deduction Be Repaid (Recaptured)(p42)

If, after you file your 2011 tax return, you or someone else receives tax-free educational assistance for, or a refund of, an expense you used to figure a tuition and fees deduction on that return, you may have to repay all or part of the deduction. This applies to assistance and refunds received by the individual claiming the deduction, and, in the case of a student who claims the deduction, refunds received by anyone else who paid such expenses for the student.
You must include the assistance or refund in income in the year you receive it to the extent that the deduction of the refunded amount reduced your tax in 2011. Refigure your tuition and fees deduction for 2011 as if the tax-free assistance or refund was received in 2011. If your tuition and fees deduction for 2011 would not have been reduced, you do not have to include any of that assistance or refund in your income in the year it was received. If your tuition and fees deduction for 2011 would have been reduced, refigure your taxable income and your tax for 2011 using the reduced tuition and fees deduction. Any increase in taxable income that would have increased your tax is the amount you must include in income (recapture). Add the recapture amount to your income for the year in which you received the assistance or refund by entering it on the "Other income" line of Form 1040. Form 1040A cannot be used. Your 2011 tax return does not change.


You paid $3,500 of qualified education expenses in December 2011, and your child began college in January 2012. You claimed $3,500 as the tuition and fees deduction on your 2011 income tax return. The reduction reduced your taxable income by $3,500. Also, you claimed no tax credits in 2011. Your child dropped two classes and you received a refund of $2,000 in 2012 after you filed your 2011 tax return. Refigure your 2011 tuition and fees deduction using $1,500 of qualified education expense instead of the $3,500. The refigured tuition and fees deduction is $1,500. Do not file an amended 2011 tax return to account for this adjustment. Instead, include the difference of $2,000 (but only to the extent this difference would have increased your 2011 tax) on the "Other income" line of your 2012 Form 1040. You cannot file Form 1040A for 2012.