Benefits, Requirements and Limitations of Specific Tax Breaks
The following PDF provides specific information for each of the tax breaks introduced above. This section will help you determine whether you may be eligible for a particular tax break, what particular requirements you must meet, and exactly what expenses are covered.
Benefits, Requirements and Limitations of Specific Tax Breaks
For 2007 Only
Higher Education Expense Deduction
Through tax year 2007, an above-the-line deduction will be allowed for tuition expenses. An above-the-line deduction can be taken even by those taxpayers who do not itemize deductions on their income tax returns. A maximum of $4000 can be deducted by single taxpayers with incomes up to $65,000 or married taxpayers with joint incomes up to $130,000. Taxpayers with higher incomes (single filers with incomes between $65,000 and $80,000 and joint filers between $130,000 and $160,000) can claim a deduction of up to $2000. Taxpayers cannot claim this deduction and the Hope or Lifetime Learning credit for the same student. Married taxpayers must file jointly to claim the deduction.
Effective dates: Through the end of tax year 2007. The deduction was set to expire at the end of 2005, but was extended.
Income ranges over which eligibility is phased out
modified AGI $65,000 - $80,000 (single), $130,000 - $160,000 (joint)
Annual dollar limit
$4,000 but limited to $2,000 for incomes in phase-out range (see above)
Whose expenses are eligible?
Taxpayer, taxpayer’s spouse, and dependents.
What expenses are allowable?
Tuition and fees
Books, room and board are not allowable.
Requirements for student and institution
Student must meet definition of an “eligible student” and institution must be an “eligible institution.” (See main Tax Breaks for Higher Education publication for details.) There is no minimum percent-time that the student must attend.
Type of education programs covered
Undergraduate
Graduate
Recognized credential
The deduction can not be claimed for classes taken to acquire or improve job skills
Additional restrictions:
You cannot claim this deduction if you are the dependent of another
Married couples must file jointly to claim.
Combining the Higher Education Tax Deduction with Other Tax Breaks
In the year you claim a Higher Education Expense Deduction, you may not:
- claim the Hope or Lifetime Learning Credit for the same student. You may claim it for the expenses of a different student.
The amount of qualified expenses for which the Higher Education Expense Deduction can be claimed must be reduced by the amount of expenses used to claim:
- tax-free Education IRA withdrawals.
- the pro-rated earnings portion of tax-free Qualified Tuition Program withdrawals.
- Savings bond interest deduction.
Special Note for 2006 Returns
This deduction expired at the end of 2005, but was extended by new legislation late in 2006. The extension was passed too late to be reflected on 2006 tax forms. As a result, many eligible filers may have missed the deduction. If you were eligible but failed to claim the deduction, you can file an amended return. Amended returns must be filed within three years of the original filing deadline.
