What Counts as Qualified Education Expenses?
- Navigating higher education costs can be challenging. Learn more about which components you can claim as qualified education expenses for your IRS taxes.
Enrolling in a higher education program can be daunting. There are many cost factors to take into consideration, including what methods you can use to pay for it. Qualified education expenses primarily include tuition, but there are also other fees that come along with enrolling in a course or program.
The IRS offers tax breaks for certain education costs, so you can get back some of what you paid. Let's take a look at qualified education expenses and some of the tax credits you may be eligible for.
What Are Qualified Education Expenses?
A qualified education expense is any expense you're required to pay to enroll in a program at an eligible educational institution. These expenses can include tuition, enrollment fees or student activity fees. If you have qualified expenses, you'll receive a Tuition Statement, or Form 1098-T, from each of the schools where those expenses came from. This form is used to report all qualified tuition and education expenses to the IRS, so you can claim them as education-related tax breaks.
Expenses you accrue at most accredited higher education institutions are eligible for tax breaks. The school you attend must be considered an eligible educational institution. This includes any college, university, trade school or other postsecondary educational institution that participates in a student aid program led by the U.S. Department of Education. If your school is recognized by the Free Application for Federal Student Aid (FAFSA) program, it's a good signifier that your school qualifies.
What Are Nonessential Education Expenses?
Although tuition is a large bulk of your educational expenses, there are several additional costs you may have to pay when enrolling in a higher education program. These can include:
- Room and board or other living expenses
- Student health fees and additional medical expenses you may need coverage for
- Expenses for sports, hobbies, games or any activity that isn't necessary for your degree program
- Insurance, which can include property or renter's insurance
- Fees associated with non-credit courses, unless they're considered a necessity for your degree program
These costs won't be included in your tuition statement, which means they aren't eligible for a tax break with the IRS.
How to Make a College Tuition Deduction?
The IRS offers three tax credits for qualified education expenses, including a tuition and fees deduction that's available to all taxpayers and two education credits that you may be eligible for.
Tuition and Fees Deduction
This deduction is available for any qualified education expenses that either you, your spouse or a dependent accrued. You can receive up to $4,000 for claiming this deduction if your modified adjusted gross income (MAGI) is $80,000 or less if you're a single filer or $160,000 or less for joint filers.
If you want to claim this deduction, you must attach two tax forms to your return. Form 1040 Schedule 1 identifies any earned income that wasn't listed on your main form. The second attachment is the Tuition and Fees Deduction form, or Form 8917, which is used to figure out how much of a deduction you're eligible to receive.
This deduction is available to everyone who qualifies because you don't need to itemize expenses to claim it.
American Opportunity Tax Credit (AOTC)
This tax credit can be used for any qualified education expenses you pay during the first 4 years enrolled in a higher education program. What counts as a qualified education expense is a little different with this tax credit because expenses such as books, classroom equipment and any supplies that were needed for a course are eligible. Even if you didn't purchase them directly through the school, you can still claim them.
The maximum amount of money you can get back annually with this tax credit is $2,500. This is calculated as 100% of your first $2,000 of qualified expenses plus 25% of the next $2,000 you spend on educational expenses. To receive the maximum deduction, you'll need to have spent a total of $4,000.
You're only able to get the full deduction for this credit if your MAGI is set at $80,000 or less for single filers and $160,000 or less for joint filers. As your income increases, the maximum credit you can receive decreases. If your MAGI is $90,000 or more for single filers or $180,000 or more for joint filers, you won't be able to claim the AOTC.
Lifetime Learning Credit (LLC)
The LLC credit can be used to claim expenses or tuition for undergraduate courses, graduate courses or professional degree courses. It can also be used to cover the cost of classes you took to learn new skills for your job.
This credit is worth 20% of the first $10,000 you spend on qualified education expenses. There's no limit to how many times you can claim this credit, and it's worth a maximum of $2,000 each year. Similar to the AOTC, how much you're eligible to get back is limited by your income. To claim the full credit, your MAGI must be set at $69,000 or less if you're a single filer or $138,000 or less for joint filers.
As your MAGI increases, the amount of credit you can receive decreases. If your MAGI is between $59,000 and $69,000 if you're a single filer or $118,000 and $138,000 if you file a joint return, your credit is significantly reduced. Form 8863, which is the Education Credits (American Opportunity and Lifetime Learning Credits) form, must be attached to your tax return to successfully claim the credit.
If you have student loan debt, you also may be eligible for the student loan interest deduction if the loans were used to cover qualified education expenses.
Is a Laptop Considered a Qualified Education Expense?
A computer for school purposes may be considered a qualified education expense with one of the educational tax credits, which means you could possibly get part of the cost back. If having a personal computer is a necessary component of your education, the IRS may view it as a qualifying expense.
Can You Claim Your Child's College Tuition on Taxes?
If you can still claim your child as a dependent on your taxes, then yes, you most likely can claim their tuition. You may be eligible for one of the educational tax credits the IRS offers, so you can get back some of the tuition you paid.