The Bottom Line

Form 8917

Last week, I blogged about how the IRS encourages Americans to go to college by offering a deduction against your total annual income in the amount of student loan interest paid. In addition to this lovely deduction, the IRS also offers the tuition and fees deduction if you don’t use student loans (and also if you do use them) to pay for a Penn education.

In practice, in order to claim this deduction, you will need to file another worksheet along with the 1040A or EZ. This is Form 8917, pictured to the right.

Tuition and Fees Deduction

This deduction works pretty much like it sounds: if you or your parents paid tuition and fees, which we all do in order to be able to take classes for grades, you generally can deduct up to $4,000 in income on your tax return. Either you or your parents can take this deduction, depending on whether or not your parents claim you as a dependent and receive the tax benefits of doing so. If your parents do this, then this deduction will be part of the family’s tax return, not your individual return. If you file independently, you can claim expenses for yourself if you paid them. In other words, no one student’s expenses can be claimed on two parties’ tax returns in the same year.

The amount of the expenses can be figured out from “Tuition and Mandatory Fees” found on Form 1098-T that SFS sends you. This form conveniently aggregates the qualified higher education expenses you paid over 2008, which is essentially everything except room and board.

Not everything needs to be paid out of pocket: you can deduct expenses that you paid for via student loans. Getting a tax deduction on technically someone else’s money? Check. But scholarships and grants can’t be used as part of the deduction, so subtract those tax-free amounts listed on the 1098-T from the tuition and mandatory fees amount.

Got a question? Email bizexpert[at]dailypennsylvanian[dot]com.

Angela Hu Taxes ask the taxpert, deductions, higher education, Taxes