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Wiley Tax Preparer: A Guide to Form 1040 by The Tax Institute at H&R Block

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CHAPTER 16

Education-Related Adjustments

Certain education-related deductions can be claimed as an adjustment to gross income (above the line). Thus, they are deductible regardless of whether the taxpayer itemizes other personal deductions.

A taxpayer can choose to deduct tuition and fees as an above-the-line deduction rather than to use such fees for calculating a tax credit, or as a miscellaneous itemized deduction for work-related costs. For example, if a taxpayer does not qualify to claim an education credit (see Chapter 30), the taxpayer may still deduct tuition and fees. The amount of the above-the-line deduction, if any, depends on a taxpayer's modified adjusted gross income (MAGI) and filing status.

A taxpayer who is a qualified educator may deduct up to $250 of out-of-pocket classroom expenses as an adjustment to income with no limit to MAGI.

A taxpayer who is repaying student loans may be able to deduct up to $2,500 of student interest each year. Again, this deduction is claimed as an above-the-line deduction. However, an MAGI limitation may limit or bar any interest deduction.

Tuition and Fees Deduction

A deduction from gross income of up to $4,000 ($2,000 for some higher-income taxpayers) can be claimed for tuition and fees for higher education. Qualified expenses can be paid out of pocket or with borrowed funds.

The amount of the deduction, if any, depends on a taxpayer's MAGI. For this purpose, MAGI is adjusted gross income (AGI) without regard to the deduction for ...

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