The Tuition and Fees Deduction expired in 2017, but expiration date has been extended to December 31, 2020. Eligible taxpayers may claim the Tuition and Fees Deduction for tax years 2019 and 2020 and they may also claim the deduction retroactively for tax year 2018.
What is the Tuition and Fees Deduction?
The Tuition and Fees Deduction allows eligible taxpayers to deduct up to $4,000 in qualified higher education expenses for themselves, a spouse and dependent children as an above-the-line exclusion from income. Qualified expenses generally include tuition and fees, textbooks and supplies that are required for enrollment or attendance at an eligible higher education institution. The Tuition and Fees Deduction expired in 2017 but the Further Consolidated Appropriations Act, 2020 extended the expiration date through the end of 2020.
Eligible parents of college students may claim the Tuition and Fees Deduction as a way to reduce adjusted gross income. Income has a much greater impact on need-based financial aid eligibility than assets, so reducing income is a way to potentially increase financial aid. The Free Application for Federal Student Aid (FAFSA) uses the prior-prior year for income and tax information. For example, if parents take an income tax deduction for 2019 it would affect their child’s FAFSA for the 2021 academic year.
How to claim the Tuition and Fees Deduction in 2020
For the 2018, 2019 and 2020 tax years, taxpayers must meet the following income requirements to be eligible for the Tuition and Fees Deduction:
- Taxpayers with a modified adjusted gross income of $65,000 or less ($130,000 if married filing jointly) may claim a maximum $4,000 deduction.
- Taxpayers with a modified adjusted gross income between $65,001 and $80,000 ($130,001 and $160,000) may claim a maximum $2,000 deduction.
- The income phaseouts for the Tuition and Fees Deduction do not change. They are not adjusted annually for inflation like income phaseouts that apply to other tax benefits.
Tuition and Fees Deduction cannot be claimed if American Opportunity Tax Credit (AOTC) or Lifetime Learning Tax Credit are claimed for the same student during the same tax year. A taxpayer may claim the Tuition and Fees Deduction and take a qualified 529 plan distribution during the same tax year for the same student, but there is no double-dipping.
Any amount of other tax-free educational assistance, such as scholarships, employer-provided educational assistance and veteran’s educational assistance received during the current year must be subtracted from the student’s qualified education expenses that are eligible for the Tuition and Fees Deduction.
Eligible taxpayers who are claiming the Tuition and Fees Deduction must complete a separate IRS Form 8917 with Form 1040 for tax years 2019 and 2020. A taxpayer may retroactively claim the deduction for 2018 by filing an amended return with Form 1040X. Amended tax returns may be filed up to three years after the original return was filed or up to two years after taxes for the year were paid. However, keep in mind that amended tax returns cannot be filed electronically and may take up to four months to process. Taxpayers should not claim the Tuition and Fees Deduction for tax year 2021 unless the expiration date is extended again.