From the Virginia Society of Certified Public Accountants - Presented by Dean Knepper, CPA, CFP®


(January 21, 2005) — Those facing skyrocketing college tuition bills will want to learn as much as possible about how the tuition and fee deduction can lower their tax bills. Before filing your 2004 tax return, read the Virginia Society of CPAs’ responses to the most common questions about this deduction.

What is the tax benefit of the tuition and fees deduction?

This deduction can reduce the amount of your income that is subject to tax by up to a maximum of $4,000 on your 2004 tax return — that’s up from $3,000 in 2003. The tuition deduction is taken as an adjustment to gross income, which means you can claim this deduction even if you do not itemize.

Who is eligible for the tuition deduction?

You may be able to deduct qualified education expenses paid during the year for yourself, your spouse or a dependent. The amount you can deduct depends on your modified adjusted gross income (MAGI). You are not eligible for the tuition deduction if another person can claim an exemption for you as a dependent. Married persons filing separately are also excluded.

What is the amount of the tuition and fees deduction for 2004?

For 2004, you qualify for the maximum deduction of $4,000 if your MAGI is not more than $65,000 for single filers and $130,000 for married taxpayers filing jointly. If you’re a single filer and your MAGI is more than $65,000 but not more than $80,000, your deduction is limited to $2,000. The $2,000 deduction also applies to joint filers whose MAGI is higher than $130,000, but not more than $160,000. No tuition and fees deduction is allowed if your MAGI exceeds $80,000 for single filers and $160,000 for joint filers. The $4,000 maximum deduction remains in effect in 2005, after which it is scheduled to expire.

What education expenses qualify?

Qualified expenses include tuition and fees but not books, personal or living expenses, such as room and board. The costs of course-related books and supplies are not considered qualified education expenses unless these expenses must be paid to the institution as a condition of enrollment or attendance.

What if I use funds from a Coverdell Education Savings Account to pay for tuition and expenses?

When you pay your tuition with tax-advantaged education funds from a Coverdell Education Savings Account or a state tuition plan, or with the interest on U.S. savings bonds, these amounts must be subtracted from your qualified expenses to arrive at the deductible amount. The same rule applies to any nontaxable employer-provided education benefits you receive.

What about graduate school?

Graduate or undergraduate level college courses can be deducted and you don’t have to be a full-time student to qualify. However, the educational institution must be eligible to participate in the student aid programs administered by the Department of Education. Virtually all accredited public, nonprofit and proprietary post-secondary institutions are eligible.

What if I have two children in college at the same time?

The tuition and fees deduction is $4,000 total per year, regardless of how many dependents are in school at the same time.

Can I take either the Hope or Lifetime Learning credit and the tuition deduction?

No, you cannot claim the tuition deduction if you also take the Hope or Lifetime Learning credit for the same student in the same year. Be aware that credits are typically more beneficial. So, before you take the tuition deduction, determine whether you can qualify for either of the two education credits.

Where can I get more help?

Check the Internal Revenue Service web site, or consult with a Certified Public Accountant if you would like to learn more about how the tuition and fees deduction can save you valuable tax dollars.


The Virginia Society of CPAs is the leading professional association dedicated to enhancing the success of all CPAs and their profession by communicating information and vision, promoting professionalism, and advocating members’ interests. Founded in 1909, the Society has nearly 8,000 members who work in public accounting, industry, government and education. This Money Management column and other financial news articles can be found in the Press Room on the VSCPA Web site at


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