Definition

• A tax deduction is an expense deducted from a taxpayer's adjusted gross income when calculating taxable income. There are a number of allowable deductions taxpayers can apply against their income. For business owners, most of the deductions relate directly to the expenses incurred while conducting business. For individual taxpayers, the deductions usually relate to encouraging certain behaviors. This is the case for the tuition and fees deduction, which allows students, or those who pay education costs for students, to deduct college costs on their tax return.
  
  

Deductions and Credits

• The tuition and fees deduction can reduce the amount of your income that is subject to income tax by as much as $4,000. The American opportunity credit and the lifetime learning credit are also available to cover college expenses. The maximum credit available for the American opportunity credit is $2,500, while the lifetime learning credit offers a maximum credit of up to $2,000. You can only claim deductions and credits for expenses paid during the tax year in question. To claim the deduction, complete Form 8917 and attach it with your filing. To claim the credits, attach Form 8863.
  
  

Qualifying Expenses

• Included in qualifying education expenses are the costs paid for tuition and fees and course-related expenses, such as books, fees and supplies to a qualified institution. A qualified institution is defined by the IRS as any college, university or vocational school that participates in a student aid program administered by the United States Department of Education. Not included in the category of qualified education expenses are room and board, travel, clerical help, or any equipment not required for your course of study.
  
  

Exceptions

• You cannot take the tuition and fees deduction if your filing status is married filing separate. You also are ineligible to claim the credit if your adjusted gross income is over $80,000 ($160,000 if filing joint). You also cannot claim the deduction if anyone else qualifies to claim you as an exemption on their return.