For many students, attending college is only possible with some financial aid assistance from the federal government. But when you fill out your tax return, the government assistance continues by allowing you a tax deduction for the tuition payments you make during the year. This can be especially valuable while you are attending school, since it can reduce your tax bill enough to get you that much-needed refund.
Parent's Dependent
Before you even start investigating claim the tuition deduction, you need to determine if your parents are eligible to claim you as a dependent on their own tax return. Regardless of whether they actually claim you, if they are eligible to, then only they can claim the tuition deduction for your college expenses. Generally, if you are under 24 years of age and you do not provide more than half of your own financial support, it is likely you are eligible to be their dependent. If this is the case, then your only option is to convince them to pass the tax savings on to you. Sometimes though, this can be harder than dealing with the IRS.
Filing Your Return
If you are over 23 or do in fact financially support yourself, then go ahead and claim the deduction. But this tuition deduction will only benefit you if you actually make enough money during the year and have to file a tax return. This is easy to figure out. Since you are entitled to claim one exemption for yourself and a standard deduction on your tax return, realistically, only the income you earn that exceeds the total of these two will be subject to income tax. Otherwise, the IRS doesn't require you to file a return and the tuition deduction will not increase your tax savings. If you earn more than this amount, then the deduction may eliminate some of your tax bill.
What it Covers
The maximum deduction you can currently claim is $4,000, but this can change in future years. Essentially, this covers any amount you pay directly to the school for tuition and fees to enroll in your courses. At some schools, this may be enough to claim the maximum deduction. If not, you also can include any amount you pay to the school for required books, supplies and equipment. However, just because your bookstore is on campus does not mean you are directly paying the school for these items.
Payments
One thing you need to consider is that the deduction is only available if you actually pay for the college expenses. It's not necessary that you pay with cash; the IRS allows you to claim the deduction even if you take out a student loan that goes directly to the school or your parents pay the tuition for you. However, if you receive a scholarship or federal grant that pays a portion of your tuition, those specific tuition costs are not included in the expenses that qualify for the deduction.
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