Which College Expenses Are Tax Deductible?

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Higher education is an expensive undertaking, but federal tax law allows a bit of relief by allowing you to deduct some education costs on your tax return. There are rules and conditions, of course, but the basic premise is that tuition and required fees are deductible for students paying their own way, and for parents or anyone else who is lending a hand.

Introduction to Deductible Education Expenses

If you're attending school, the IRS allows some education-related deductions on your tax return. With a deductible expense, you may subtract the amount paid from your taxable income, which in turn lowers the amount of tax you have to pay. Deductions also may help lower your tax bracket, which means you pay a lower tax rate overall.

Education Expense Deduction

If you pay your own education expenses, you can claim a deduction of up to $4,000. The IRS does not allow this deduction if your filing status is "married, separate." Nor can you claim the deduction if someone else, such as a parent, can claim an exemption for you as a dependent on his own tax return. Even if the parent doesn't take the exemption, it's still available -- meaning you can't take a tax deduction on tuition and fees. Also, the IRS does not allow this deduction if your gross income is higher than $80,000 if you're single, or $160,000 and you're filing a married, joint return.

Qualified and Deductible Expenses

Tuition qualifies for this deduction, as do the costs for lab fees, books, supplies and expenses for any other course materials, if you had to buy them in order to attend. If the school requires activity fees of any kind as a condition of enrollment, these costs also qualify for the deduction. If the college requires an application fee as a condition of enrollment, that fee also is deductible. The IRS disqualifies living expenses, such as room, board, transportation, health insurance, utility bills, and clothing. The expense must be directly related to your education, and mandatory. You also must be attending a post-secondary institution that is eligible for a federal student aid program.

Loans, Grants and Education Expenses

You can take the deduction if you are a vocational, undergraduate, graduate or post-doctoral student, whether or not you received a student loan meant to cover the cost of education. But the IRS rules treat any tax-free assistance, such as a grant or scholarship, in a different manner. If you received such assistance, you must reduce the education expense deduction by the amount of the assistance. Also, any expense for which you claim a deduction elsewhere on your tax return -- such as the cost of a computer used in your business, if you are self-employed and complete Schedule C -- can't also be claimed as an education expense.

How to Claim the Deduction

Claiming an education expense means filling out the one-page Form 8917, Tuition and Fees Deduction, and filing it along with your 1040 tax return. You don't have to itemize these expenses, or send in receipts, but it's smart to keep any records you have in case the IRS questions the deduction. After calculating the total amount of your claim, enter that amount on Line 34 of your 1040 and subtract it from gross income.