Tax Tip of the Week
For the week of August 9, 2004

Enjoy this improved deduction for education expenses

Did you know that there’s an improved deduction for higher education expenses this year? The maximum amount has increased, and more taxpayers are eligible. It’s an above-the-line deduction, meaning that you can claim it whether or not you itemize. This year the maximum amount is $4,000, up from $3,000 last year.

In previous years the income cut-off was $130,000 for joint filers and $65,000 for singles. If your income was above this level, you couldn’t claim the deduction. That limit still applies if you want to claim the full amount. But higher-income taxpayers earning up to $160,000 can now deduct up to $2,000 in qualified expenses. The new upper income limit for single filers is $80,000. You can’t claim any deduction if you’re married filing a separate return.

You can claim the deduction for tuition and certain related expenses. These include student activity fees and other course-related expenses that you’re required to pay to the college. The tuition must be for post-secondary education at an eligible institution. Most private or public universities, colleges, or vocational schools qualify.

To claim the deduction, the expenses must be for you, your spouse, or for a dependent that you claim on your tax return. You’ll have to coordinate the deduction with any education credits or other tax-free education funds you use.

Don’t overlook the improved credit this year. Contact our office to see how it might fit with your overall education financing.

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