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Taking $4,000 Off Education Expenses

August 6, 2012

Everyone could use a bit more money for whatever. If you went to school last year and paid for some of this school with your own money, then you may qualify for a big deduction. In addition, it's not just tuition that you can deduct. There is a little known form that you can file with your 1040A that will allow you to deduct up to $4,000 in education expenses for the following year. Whether you or a member of your family went to college last year, then you can get this deduction. However, there are some eligibility restrictions, and your GI Bill and tuition assistance can also affect the amount that you can deduct. This guide will help you claim this benefit and tell you a bit more about it.

How Does the Deduction Work?

The deduction actually reduces the amount of your income by up to $4,000. It's an income adjustment, which means that you claim this deduction even if you do not plan on itemizing deductions on Schedule A, Form 1040. This is most beneficial to those who can't take advantage of the Hope or Lifetime Learning Credit due to income limits.

Are You Eligible for the Deduction?

You can deduct education expenses that qualify and were paid during the year to your spouse, dependent or yourself. However, if you are married and filing separately, you are not eligible for this deduction. In addition, if another person is claiming you as an exemption as a dependent on a tax form, you can't qualify. In addition, the education expenses paid must have been to a higher education institution.

Which Expenses Can You Deduct?

The deduction covers most major expenses incurred during undergraduate and graduate school. If you paid tuition and fees, room and board, books, school supplies, school equipment or transportation expenses, these are all qualify towards the deduction.

What If You Paid with GI Bill Funds?

Unfortunately, since GI Bill funds are untaxable income, you can't claim a deduction for any amount that you paid with these funds. You can only claim expenses that are not covered or exceed any amount that you received from the GI Bill assistance that you received.

How Do You Decipher Between Deductions and Credits?

Tax deductions are considered to be expenses that the IRS allows you to apply towards an adjusted gross income (AGI). Tax credits are income tax credits that reduce your income tax. Hope Education and Lifetime Learning credits are tax credits that reduce your taxes.

How Do You File for the Deduction?

You just need to complete Form 8917 and submit with your Form 1040 or 1040A in order to get this deduction.

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