Do I Qualify for a College Tax Deduction?
by Sue R. St. Amour, CPA

Do you qualify for the college tuition tax deduction? There are a number of college tuition tax deductions and credits available. There are two non refundable tax credits available, the Hope Credit and the Lifetime Learning Credit. Each of these credits is based on qualified tuition and fees, and does not include amounts paid for room and board, student activity and health fees, andinsurance expenses. Also, these credits phase out based on modified adjusted gross income (AGI), the 2005 phase-out for Married Filing Jointly and Surviving Spouse filing status is between $87,000 and $107,000; and for Single and Head of Household filing status is between $43,000 and $53,000. These credits are not available to anyone filing as Married Filing Separately.

The Hope Credit is available for tuition and fees for college expenses in the first two years of undergraduate education. The student must be enrolled in a program leading to a recognized educational credential, must carry at least half of the normal full time workload and cannot be a convicted felon. A taxpayer can claim this credit for each eligible student, which includes the taxpayer, the taxpayers spouse and the taxpayers claimed dependents. The credit is up to $1,500 per student each year based on a calculation of tuition and fees paid.

The Lifetime Learning Credit is available for tuition and fees for enrollment in an eligible education institution for undergraduate, graduate or professional courses that allow the individual to acquire or improve job skills. The taxpayer can claim this credit annually for the combined expenses for all eligible students. The maximum credit is $2,000 for each eligible taxpayer, and is calculated by multiplying qualified tuition and fees up to $10,000 by 20%.

2005 is the final year for a deduction for qualified higher educational expenses, as defined in the same manner as the above credits. This deduction is limited based on the taxpayer’s AGI as follows:
 

This deduction is not available to anyone filing as Married Filing Separately. Also, this deduction is not available in any year the Hope or Lifetime Learning Credits are claimed for any expenses of the same student, or for expenses paid with a tax-free withdrawal from an Education Savings Accounts, 529 Plan or interest from Education Savings Bonds.

There are also deductions available for student loan interest paid on qualified education loans, subject to AGI phase outs; education expenses paid if they are ordinary and necessary business expenses to maintain or improve employment skills.

There are also a number of programs available for savings for higher education expenses such as Education Savings Bonds, Education Savings Accounts and Qualified Tuition Programs.

As you can see, there are a number of ways that a taxpayer can receive a tax deduction/credit for college tuition, whether saving for future college expenses, currently paying college expenses or paying on college loans.

Susan R. St. Amour, CPA is a manager and tax specialist at Green & Seifter CPAs, PLLC. Sue also assists clients in completing NewYork State Qualified Empire Zone Exemption tax credits. If you would like more information, please contact Sue at 315.701.6432 or sstamour@GreenSeifterCPAs.com.

Green and Seifter CPAs offers a wide array of professional services spanning decades of experience in the areas of accounting, auditing, bookkeeping, financial planning, fraud, and taxation to individuals and businesses throughout Central New York.

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