How to Calculate College Tuition on a Tax Return
Original post by Emily Weller of Demand Media
If you pay college tuition for a dependent child or for yourself, you may be able to receive a tax benefit from it. Depending on your income, you can either claim a tax credit or deduct a certain amount of the tuition and fees you paid. The tuition and fees deduction is an above-the-line deduction, so you do not have to itemize your deductions to earn it. As of 2011, two credits are available, the American opportunity credit and the lifetime learning credit. You can only claim one for each student.
- 1 Deduct Tuition and Fees
- 2 Claim a Tax Credit
Deduct Tuition and Fees
Look at the amount listed on 1098-T in either box 1 or box 2. Box 1 is the amount the college received to pay your tuition, box 2 is the amount the college billed you. There will be a number in only one of the boxes.
Subtract the amount you've received from scholarships or grants to pay for college from the amount on 1098-T. You can't deduct scholarships or grants since you've already received them tax free. Deduct any distributions from a Coverdell account you've used to pay for school that year as those are not-deductible either.
Write the amount of eligible tuition you paid on line one of IRS form 8913. Repeat this with any other students whose tuition you paid, then total the amounts and record on line 2.
Deduct any other above-the-line deductions from your income to determine your adjusted gross income. Use the amount on 1040 line 22 or 1040A line 15 as your income. Write it on line 3. Subtract any amount recorded on lines 23 through 33 on 1040, or lines 16 through 18 on 1040A from the income. Record the information on line 5.
Use the total amount of expenses as your deduction if it is less than $2,000 and your adjusted income is greater than $65,000, but less than $80,000, or between $130,000 and $160,000 if married and filing jointly. Write the amount of line 6. If it is more than $2,000, write $2,000. If you earn less than $65,000 or $130,000, use either the amount or $4,000, which ever is less.
Record the amount you can deduct for tuition on line 34 of form 1040 or line 19 on form 1040A.
Claim a Tax Credit
Decide whether you will claim the American opportunity credit or lifetime learning credit. You or the student must be in the first four years of post-secondary schooling to claim the American opportunity credit. You must also be enrolled in a degree-granting program. The lifetime learning credit is open to any enrolled in post-secondary education.
Subtract any grants, scholarships or money from a Coverdell account used to pay for school from the amount listed on 1098-T box 1 or 2. Write this amount on line 1 of part I of form 8863 for the American Opportunity Credit or line 3 of part II for the Lifetime Learning credit. The amount cannot be higher than $4,000 per student for the American opportunity credit.
Deduct $2,000 from the amount of your expenses, then multiply that amount by 25 percent to determine the amount of the American opportunity credit you're eligible for. Record that amount in box e of line 1. If your educational expenses are less than $2,000, use 0 as the amount.
Add $2,000 to the amount in box e. If the amount is 0, use your original expenses. Write the amount in box F.
Add the amounts in box F for each student, then record on line 2.
Record your expenses on line 3 of part II if you are claiming the lifetime learning credit in addition to or instead of the American opportunity credit. Add the expenses for each student, then record on line 4.
Write the amount on line 4 on line 5 as well, unless it is larger than $10,000. If the amount on line 4 is more than $10,000, write $10,000 on line 5.
Multiply the amount on line 5 by 20 percent and record this figure on line 6.
Use the income listed on form 1040, line 38 or 1040A line 22 to determine if you are eligible for the American opportunity credit or lifetime learning credit. If your income is more than $90,000 if single or $180,000 if married, you are not eligible for the American opportunity credit. If your income is greater than $60,000/$120,000, you cannot claim the lifetime learning credit.
Figure out the amount of credit you can claim by subtracting your income from either $90,000/$180,000 or $60,000/$120,000 depending on the credit and your marital status. If the difference between your income and the limit is equal to or greater than $10,000/$20,000, multiply the amount from lines 2 or 6 by 1. If the difference is less than $10,000/$20,000, divide the difference by $10,000 or $20,000, then multiply the amount from lines 2 or 6 by the decimal amount. This is the amount of the credit you can claim.
Tips & Warnings
- You cannot claim a credit or deduction if you are married and file your taxes separately.
- Form 1098-T
- IRS Form 1040 or 1040A
- IRS Form 8863
- IRS Form 8917
- IRS: Publication 970: American Opportunity Credit
- IRS Publication 970: Lifetime Learning Credit
- Univ. of California Irvine Financial Services: Frequently Asked Questions About IRS Form 1098-T
- IRS: 2010 Form 8917 (PDF)
- IRS: 2010 Form 8863 (PDF)
About the Author
Based in Pennsylvania, Emily Weller has been writing professionally since 2007, when she started writing theater reviews for offoffonline.com and Theater Talk's New Theatre Corps Blog. Her writing covers a wide range of topics including theater, vegetarianism, travel and news. Weller has a Master of Fine Arts in dramaturgy and theater criticism from CUNY/Brooklyn College.
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