Higher Education Expenses Deduction

Beginning in 2002 and running through 2005, an above-the-line deduction is available for qualified tuition at a post-secondary institution and related expenses (defined the same as for the Hope Scholarship and Lifetime Learning credits). The amount of the deduction depends on your AGI and the tax year in which the deduction is claimed. In 2005, for example, the amount of the deduction is limited to $4,000, and is only available to those with AGIs not exceeding $65,000 ($130,000 for joint filers) for the year.

Taxpayers whose income exceeds that limit but does not exceed $80,000 ($160,000 for joint filers) in 2005 may deduct up to $2,000 in qualified expenses.

An above the line deduction means that you can take the deduction even if you do not itemize deductions elsewhere and it is not reduced or limited otherwise. The only catch is that you must first use up any other education deductions, like the Hope and Lifetime Learning credits. Also, if the Hope and Lifetime Learning credits are used, the qualified tuition and related expenses of that student for the year are not deductible.

The new tuition and fees deduction is claimed on Line 34 of Form 1040 or Line 19 of Form 1040A.