Educational Expenses

3.1 Itemized Deductions/Standard Deductions: Autos, Computers, Electronic Devices (Listed Property)

My university required each incoming freshman to come to school with their own computer. Is there any way to deduct the cost of the computer from my tax liability?

The cost of a personal computer is generally a personal expense that is not deductible. However, if the school bills everyone, as a condition of attendance or enrollment, for proprietary computer devices and/or software available no where else, then this may qualify as an expense towards either the Lifetime Learning Credit or Hope Credit.

3.2 Itemized Deductions/Standard Deductions: Education & Work-Related Expenses

What types of educational expenses are deductible?

Deductible educational expenses include amounts spent for tuition, books, supplies, laboratory fees, and similar items. They also include the cost of correspondence courses, as well as formal training and research you do as part of an educational program. Transportation and travel expenses to attend qualified educational activities may also be deductible.

Am I eligible to claim both my job education expenses (minus 2% of AGI) and the Lifetime Learning Credit on my taxes?

If you are eligible to deduct educational expenses and are also eligible for the lifetime learning credit, then it is possible to claim both, as long as you do NOT use the SAME educational expenses to claim both benefits. Your expenses must be divided between the two. This is sometimes desirable because a qualifying expense for one benefit may not be a qualifying expense for the other tax benefit.

My employer is including my graduate school tuition reimbursements on my W-2 as wages. Where do I claim these education expenses on my Form 1040?

If your graduate school tuition is deductible and the reimbursements are included in your income as wages, you may take the expense as a miscellaneous itemized deduction on Form 1040, Schedule A (PDF), Itemized Deductions. You may also need to attach Form 2106 (PDF), Employee Business Expenses.

How do I claim an educational expense on my return?

Employees, generally, must complete Form 2106 (PDF), Employee Business Expenses, or Form 2106-EZ (PDF), Unreimbursed Employee Business Expenses, when job-related educational expenses are involved. Educational expenses are deducted as miscellaneous deductions on Form 1040, Schedule A (PDF), Itemized Deductions. Alternatives to educational expense deductions should also be considered, such as the Lifetime Learning and Hope Credits, as discussed in Publication 970, Tax Benefits for Education, Chapter 2 and 3.

Self-employed individuals include educational expenses as deductions on Form 1040 Schedule C (PDF), Profit or Loss From Business; Form 1040, Schedule C-EZ (PDF) , Net Profit From Business; or Form 1040, Schedule F (PDF), Profit or Loss From Farming. For more information, refer to the forms, instructions, and publications listed above plus Tax Topic 513, Educational Expenses, and Tax Topic 605, Education Credits.

What are the limits for deducting interest paid on a student loan?

The maximum deductible interest on a qualified student loan is $2,500 per return. If you are a taxpayer whose return status is married filing jointly, you are allowed to deduct the full $2,500 only when your modified adjusted gross income (MAGI) is $100,000 or less. If your MAGI is more than $105,000, but less than $135,000, the amount of your student loan interest deduction is gradually reduced. The instructions for Form 1040 (PDF) show you how to compute the deduction. If your MAGI is $135,000 or more, you are not able to take any deduction.

For those whose filing status is single, head of household, or qualifying widow(er), the full $2,500 deduction is allowed for MAGI levels equal to or below $50,000. For MAGI between $50,000 and $65,000, the deduction amount is gradually reduced. The Form 1040 Instructions show you how to compute the deduction. If your MAGI amount is $65,000 or more, there is no deduction.

There is no deduction if you file as married filing separately, if you are claimed as a dependent, or if the loan is from a related party or a qualified employer plan.

Last year, my parents took out a student loan for me in their name and I also took out a student loan. My parents received Form 1098-E for their loan and I also received Form 1098-E for my loan. Can we both claim the interest from the loans on our tax returns? Last year, I was not their dependent.

In order for a taxpayer to claim a deduction for student loan interest, the loan must be incurred for the taxpayer, the taxpayer's spouse, or a person who was the taxpayer's dependent when the taxpayer took out the loan. Since you were not your parents' dependent when they took out the student loan, the interest they paid on the loan does not qualify for deduction. However, the student loan interest payments you made on the student loan you took out on your behalf are eligible for deduction, provided all the other requirements are met.

7.4 Child Care Credit/Other Credits : Hope & Life Time Learning Educational Credits

What expenses qualify for the education credits?

Expenses that qualify are tuition and fees required for enrollment or attendance at any college, vocational school, or other post-secondary educational institution eligible to participate in the student aid programs administered by the Department of Education.

Qualified expenses do not include books, room and board, student activities, athletics (unless the course is part of the student's degree program), insurance, equipment, transportation, or other similar personal, living, or family expenses. The cost of books and equipment are generally not qualified expenses because eligible educational institutions usually do not require that fees for such books or equipment be paid to the institution as a condition of the student's enrollment or attendance at the institution.